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Full text of "A handbook of bankruptcy law; embodying the full text of the act of Congress of 1898, and annotated with references to pertinent decisions under former statutes"




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I 3 1924 019 293 392 




Cornell University 
Library 



The original of this book is in 
the Cornell University Library. 

There are no known copyright restrictions in 
the United States on the use of the text. 



http://www.archive.org/details/cu31924019293392 



BANKRUPTCY REPORTS. 

All decisions of the United States Circuit and Dis- 
trict Courts and the Circuit Courts of Appeals, under 
the National Bankruptcy Law of 1898, will be fully 
and promptly reported in the 

FEDERAL REPORTER. 

All decisions of the United States Circuit and Dis- 
trict Courts under the former National Bankruptcy 
Laws are fully reported, with annotations and digest of 
the United States Supreme Court decisions, in the 

FEDERAL CASES. 

This includes all the Federal decisions in the Na- 
tional Bankruptcy Register and other periodicals, as 
well as those in the old Circuit and District Court 
Reports. 



For full information regarding the Federal Reporter 
and the Federal Cases, address the publishers, 

West Publishing Co., 

St. Paul, Minn. 






A HANDBOOK 



OF 



BANKRUPTCY LAW 



Embodying the full text of the Act of Congress of 1898, 

and annotated with references to pertinent 

decisions under former statutes 



By H. CAMPBELL BLACK 

Author of "Black's Law Dictionary," and of Treatises on "Judgments," 

"Tax Titles, " "Constitutional Law," "Statutory Construction," 

"Removal of Causes," "Intoxicating Liquors," etc. 



St. Paul, Minn. 

WEST PUBLISHING CO. 

1898 






'1 




'^Ml 



(s>. 

Copyright, i8g8, 

EI 

HENRY CAMPBELL BLACK. 



PREFACE. 



The following pages contain a complete and verbatim copy 
of the National Bankruptcy Act of 1898, with annotations em- 
bodying the substance of all the decisions rendered under 
former acts of congress on the same subject which are perti- 
nent and likely to prove of value or importance under the pro- 
visions of the new statute. 

"^Tiile the endeavor has been to make the annotations as 
full as practicable throughout, special prominence has been 
given to the elucidation of those questions which will prob- 
ably first come before the courts for settlement — questions, 
that is, of jurisdiction, of procedure, of the persons and corpo- 
rations entitled to take advantage of the law, or liable to be 
proceeded against under it, and in regard to the acts of bank- 
ruptcy upon which a petition in involuntary cases may be 
founded. 

It will be proper to add that the volume now offered to the 
profession represents the fruits of the author's study and re- 
search extending over a period of many years. 

H. C. B. 

(V) 



TABLE OF CONTENTS. 



CHAPTER I. 

DEFINITIONS. 
Section Page 
1. Meaning of Words and Phrases 1 



CHAPTER U. 

CREATION OP COURTS OF BANKRUPTCY AND THEIR JU- 
RISDICTION. 

(§ 2, p. 5.) 

CHAPTER in. 

BANKRUPTS. 

3. Acts of Bankruptcy Iff 

4. Who May Become Bankrupts 25 

5. Partners 40 

G. Exemptions of Bankrupts 48 

7. Duties of Bankrupts 53- 

8. Death or Insanity of Bankrupts 5T 

9. Protection and Detention of Bankrupts 58 

10. Extradition of Bankrupts 60 

11. Suits By and Against Bankrupts 61 

12. Compositions, when Confirmed 69 

13. Compositions, when Set Aside 7& 

14. Discharges, when Granted 77 

15. Discharges, when Revoked 91 

10. Co-Debtors of Bankrupts 94 

17. Debts not Affected by a Discharge 95, 

BL. BANK. (vi) 



TABLE OF CONTENTS. Vll 



CHAPTER IV. 

COURTS AND PROCEDURE THEREIN. 
Section Page 

18. Process, Pleadings, and Adjudications .106 

19. Jury Trials 118 

20. Oaths, Affirmations 119 

21. Evidence 120 

22. Reference of Cases after Adjudication 122 

23. Jurisdiction of United States and State Courts 123 

24. Jurisdiction of Appellate Courts 131 

25. Appeals and Writs of Error 131 

26. Arbitration of Controversies 134 

27. Compromises 135 

28. Designation of Newspapers 136 

29. Offenses 136 

30. Rules, Forms, and Orders 139 

31. Computation of Time 139 

32.. Transfer of Cases 140 



CHAPTER V. 

OFFICERS, THEIR DUTIES AND COMPENSATION. 

33. Creation of Two Offices 141 

34. Appointment, Removal, and Districts of Referees 141 

35. Qualifications of Referees 141 

36. Oaths of Office of Referees. .• 142 

37. Number of Referees 143 

38. Jurisdiction of Referees 143 

39. Duties of Referees 145 

40. Compensation of Referees 140 

41. Contempts before Referees 147 

42. Records of Referees 148 

43. Referee's Absence or Disability 148 

44. Appointment of Trustees 140 

45. Qualifications of Trustees 152 

46. Death or Removal of Trustees 153 

47. Duties of Trustees 154 

48. Compensation of Trustees 164 



Vlll TABLE OF CONTENTS. 

Section . P^Se 

49. Accounts and Papers of Trustees 165 

50. Bonds of Referees and Trustees 165 

51. Duties of Clerks 167 

52. Compensation of Clerks and Marshals 168 

53. Duties of Attorney-General 168 

54. Statistics of Bankruptcy Proceedings 169 

CHAPTEE, VI. 

CEEDITORS. 

55. Meetings of Creditors 170 

56. Voters at Meetings of Creditors 171 

57. Proof and Allowance of Claims 172 

58. Notices to Creditors 181 

59. Who may F'ile and Dismiss Petitions 182 

CO. Preferred Creditors 187 

CHAPTER VII. 

ESTATES. 

61. Depositories for Money 208 

62. Expenses of Administering Estates 209 

63. Debts which may be Proved 212 

64. Debts which have Priority 225 

65. Declaration and Payment of Dividends 230 

66. Unclaimed Dividends 231 

67. Liens 233 

68. Set-OfCs and Counterclaims 243 

69. Possession of Property 248 

70. Title to Property 249 

— The Time when this Act shall go into Effect 267 

TABLE OP CASES CITED. 

(Page 277.) 

INDEX. 

(Page 293.) 

T 



THE 

LAW OF BANKRUPTCY. 



CHAPTER I, 

DEFINITIONS. 

MEANING OF WORDS AND PHRASES. 

§ 1. a The -words and phrases used in this act 
and in proceedings pursuant hereto shall, unless the 
same be inconsistent -with the context, be construed 
as fono-wrs : (1) "A person against -whom a petition 
has been filed " shall include a person -who has filed 
a voluntary petition; (2) "adjudication" shall mean 
the date of the entry of a decree that the defend- 
ant, in a bankruptcy proceeding, is a bankrupt, or 
if such decree is appealed from, then the date -when 
such decree is finally confirmed ; (3) " appellate 
courts" shall include the circuit courts of appeals 
of the United States, the supreme courts of the 
territories, and the supreme court of the United 
States ; (4; " bankrupt " shall include a person 
against -whom an involuntary petition or an appli- 
cation to set a composition aside or to revoke a dis- 
charge has been filed, or -who has filed a voluntary 
petition, or -who has been adjudged a bankrupt; (5) 
"clerk" shall mean the clerk of a court of bank- 

BL. BANK.— 1 



DEFINITrONS. 



(Ch. 1 



ruptcy; (6) "corporations" shall mean all bodies 
having any of the po^wers and privileges of private 
corporations not possessed by individuals or part- 
nerships, and shall include limited or other part- 
nership associations organized under laws making 
the capital subscribed alone responsible for the 
debts of the association; (7) "court" shall mean 
the court of bankruptcy in -which the proceedings 
are pending, and may include the referee; ^8) 
"courts of bankruptcy" shall include the district 
courts of the United States and of the territories, the 
supreme court of the District of Columbia, and the 
United States court of the Indian Territory, and of 
Alaska; (9) "creditor" shall include anyone -who 
owns a demand or claim provable in bankruptcy, 
and may include his duly authorized agent, attorney, 
or proxy; (10) "date of bankruptcy," or "time of 
bankraptcy," or "commencement of proceedings," 
or "bankruptcy," w^ith reference to time, shall mean 
the date w^hen the petition w^as filed; (11) "debt" 
shall include any debt, demand, or claim provable 
in bankruptcy; (12) "discharge" shall mean the 
release of a bankrupt from all of his debts which 
are provable in bankruptcy, except such as are 
excepted by this act; (13) "document" shall include 
any book, deed, or instrument in writing; (14) 
"holiday" shall include Christmas, the Fourth of 
July, the Twenty-Second of February, and any day 
appointed by the President of the United States or 
the congress of the United States as a holiday or 
as a day of public fasting or thanksgiving; (15) a 
person shall be deemed insolvent within the pro- 
visions of this act whenever the aggregate of his 
property, exclusive of any property which he may 



§ 1) MEANING OF WORDS AND PHRASKS. 3 

have conveyed, transferred, concealed, or removed, 
or permitted to be concealed or removed, with, in- 
tent to defraud, hinder or delay his creditors, shall 
not, at a fair valuation, he sufficient in amount to 
pay his debts; (16) "judge" shall mean a judge of 
a court of bankruptcy, not including the referee; 
(17) "oath" shall include affirmation; (18) "officer" 
shall include clerk, marshal, receiver, referee, and 
trustee, and the imposing of a duty upon or the 
forbidding of an act by any oflficer shall include 
his successor and any person authorized by laTV to 
perform the duties of such officer; (19) "persons" 
shall include corporations, except ■wrhere otherw^ise 
specified, and officers, partnerships, and -women, 
and -when used with reference to the commission 
of acts w^hich are herein forbidden shall include 
persons ivho are participants in the forbidden acts, 
and the agents, officers, and members of the board 
of directors or trustees, or other similar controlling 
bodies of corporations; (SO) "petition" shall mean 
a paper filed in a court of bankruptcy or w^ith a 
clerk or deputy clerk by a debtor praying for the 
benefits of this act, or by creditors alleging the 
commission of an act of bankruptcy by a debtor 
therein named; (21) "referee" shall mean the ref- 
eree who has jurisdiction of the case or to whom 
the case has been referred, or anyone acting in his 
stead; (22) "conceal" shall include secrete, falsify, 
and mutilate; (23) "secured creditor" shall include 
a creditor w^ho has security for his debt upon the 
property of the bankrupt of a nature to be assign- 
able under this act, or w^ho ow^ns such a debt for 
w^hich some indorser, surety, or other persons sec- 
ondarily liable for the bankrupt has such security 



4 DEFINITIONS. (Ch. 1 

upon the bankrupt's assets; (24) "states" shall in- 
clude the territories, the Indian Territory, Alaska, 
and the District of Columbia; (25) "transfer" shall 
include the sale and every other and diflferent mode 
of disposing of or parting with property, or the 
possession of property, absolutely or conditionally, 
as a payment, pledge, mortgage, gift, or security; 
(26) "trustee " shall include all of the trustees of an 
estate; (27) "wage-earner" shall mean an individ- 
ual w^ho w^orks for w^ages, salary, or hire, at a rate 
of compensation not exceeding one thousand five 
hundred dollars per year; (28) w^ords importing 
the masculine gender may be applied to and in- 
clude corporations, partnerships, and women; (29) 
w^ords importing the plural number may be applied 
to and mean only a single person or thing; (30) 
words importing the singular number may be ap- 
plied to and mean several persons or things. 



§ 2) CREATION OF COURTS OF BANKRUPTCY. 



CHAPTER n. 

OEEATION OF COURTS OF BANKRUPTCY AND THEIR 
JURISDICTION. 

§ 2. That the courts of bankruptcy as hereinbe- 
fore defined, viz, the district courts of the United 
States in the several states, the supreme court of 
the District of Columbia, the district courts of the 
several territories, and the United States courts in 
the Indian Territory and the district of Alaska, are 
hereby made courts of bankruptcy, and are hereby 
invested, ■within their respective territorial limits 
as no-w established, or as they may be hereafter 
changed, with such jurisdiction at la-w and in equity 
as Tvill enable them to exercise original jurisdic- 
tion in bankruptcy proceedings, in vacation in 
chambers and during their respective terms, as they 
are now or may be hereafter held, to (1) adjudge 
persons bankrupt -who have had their principal 
place of business, resided, or had their domicile 
"writhin their respective territorial jurisdictions for 
the preceding six months, or the greater portion 
thereof, or who do not have their principal place 
of business, reside, or have their domicile w^ithin 
the United States, but have property within their 
jurisdictions, or who have been adjudged bankrupts 
by courts of competent jurisdiction w^ithout the 
United States and have property within their ju- 
risdiction; (2) allow claims, disallow^ claims, recon- 
sider allowed or disallow^ed claims, and allow^ or 
disallow them against bankrupt estates; (3) appoint 
receivers or the marshals, upon application of par- 



6 CREATION OF COURTS OF BANKRUPTCY. (Ch. 2 

ties in interest, in case th.e courts shall find it ab- 
solutely necessary, for the preservation of estates, 
to take charge of the property of bankrupts after 
the filing of the petition and until it is dismissed 
or the trustee is qualified; (4) arraign, try, and 
punish bankrupts, officers, and other persons, and 
the agents, ofi&cers, members of the board of direct- 
ors or trustees, or other similar controlling bodies, 
of corporations for violations of this act, in accord- 
ance with the laws of procedure of the United 
States now in force, or such as may be hereafter 
enacted, regulating trials for the alleged violation 
of laws of the United States; (5) authorize the busi- 
ness of bankrupts to be conducted for limited peri- 
ods by receivers, the marshals, or trustees, if neces- 
sary in the best interests of the estates; (6) bring 
in and substitute additional persons or parties in 
proceedings in bankruptcy when necessary for the 
complete determination of a matter in controversy; 
(7) cause the estates of bankrupts to be collected, 
reduced to money and distributed, and determine 
controversies in relation thereto, except as herein 
otherw^ise provided; (8) close estates, w^henever it 
appears that they have been fully administered, 
by approving the final accounts and discharging 
the trustees, and reopen them w^henever it appears 
they w^ere closed before being fully administered; 
(9) confirm or reject compositions bet'ween debtors 
and their creditors, and set aside compositions and 
reinstate the cases; (10) consider and confirm, mod- 
ify or overrule, or return, w^ith instructions for 
further proceedings, records and findings certified 
to them by referees; (11) determine all claims of 
bankrupts to their exemptions; (12) discharge or 



§ 2) JURISDICTION. 7 

refuse to discharge bankrupts and set aside dis- 
charges and reinstate the cases; (13) enforce obedi- 
ence by bankrupts, of&cers, and other persons to 
all lawful orders, by fine or imprisonment or fine 
and imprisonment; (14) extradite bankrupts from 
their respective districts to other districts; (15) make 
such orders, issue such process, and enter such 
judgments in addition to those specifically provided 
for as may be necessary for the enforcement of 
the provisions of this act; (16) punish persons for 
contempts committed before referees; (17) pursuant 
to the recommendation of creditors, or ■wrlien they 
neglect to recommend the appointment of trustees, 
appoint trustees, and upon complaints of creditors, 
remove trustees for cause upon hearings and after 
notices to them; (18) tax costs, whenever they are 
allowed by law, and render judgments therefor 
against the unsuccessful party, or the successful 
party for cause, or in part against each of the 
parties, and against estates, in proceedings in bank- 
ruptcy; and (19) transfer cases to other courts of 
bankruptcy. 

Nothing in this section contained shall be con- 
strued to deprive a court of bankruptcy of any 
pow^er it ■would possess w^ere certain specific pow^- 
ers not herein enumerated. 

JURISDICTION. 

General Jiirisdiotion of JBankruptcy Courts. 

The proceeding in bankruptcy is equivalent to the general 
creditors' bill in chancery, and is a plenary proceeding, its 
practice being prescribed by the statute, and to that extent 
varjing from the chancery practice obtaining in creditors' 



8 CREATION OF COURTS OF BA.NKRUPTCY. (Ch. 2 

bills. So far as not varied by statute, the practice should 
be the same. The collateral proceedings incident to and aris- 
ing in the course of a bankruptcy proceeding, in the form of 
petitions and motions nisi, against persons already parties to 
the bankruptcy proceeding, are of the same character as like 
collateral proceedings incident to and arising in a creditors' 
bill in chancery, and are summary only where they would be 
so in a creditors' bill, except where allowed by statute. In re 
Anderson, 23 Fed. 482. The proceeding in bankruptcy is in 
the nature of a proceeding in rem; the acquisition of jurisdic- 
tion is based upon the taking possession, by the court, of the 
debtor's whole property and effects, and upon its adjudication 
as to his status. Hence the federal court in which the bank- 
ruptcy proceedings are commenced has jurisdiction of the debt- 
or's whole estate, wherever situate, and it is the only court 
which can enjoin a mortgage creditor from foreclosing his 
mortgage in a state court, notwithstanding the creditor re- 
sides within another circuit. Markson v. Heany, 1 Dill. 497, 
Fed. Gas. No. 9,098. So, the bankruptcy court has power to 
issue an injunction to restrain the sheriff of a state court from 
proceeding to sell the property of the estate under execution 
issuing from the state court on a judgment obtained prior to 
the institution of the bankruptcy proceedings. In re Mallory, 
1 Sawy. 88, Fed. Gas. No. 8,991. So, the court has jurisdic- 
tion of an action by the trustee in bankruptcy of a voluntary 
bankrupt to recover a balance due from a principal to the bank- 
rupt as his factor, for such a suit is essential to the winding- 
up of the proceedings in bankruptcy, and jurisdiction in it df:- 
pends upon the subject-matter, not the parties. Kelly v. 
Smith, 1 Blatchf. 290, Fed. Cas. No. 7,675. But the court 
of bankruptcy is created such by the statute, and has no powers 
but those conferred upon it, either expressly or by necessary 
implication, for the just and full execution of the law. Clark 
V. Binninger, 38 How. Prac. 341; In re Morris, Grabbe, 70, 
Fed. Cas. No. 9,s:25. Nevertheless, the federal courts, exercising 
their statutory powers in matters of bankruptcy, are not to be 



§ 2) JURISDICTION. 9 

regarded as limited or inferior tribunals, in such sense that 
their jurisdiction must affirmatively appear on the face of the 
record in order to the validity of their judgments; jurisdiction 
will be presumed, as in the case of all the higher courts. 
Hayes v. Ford, 15 N. B. R. 569; Chemung Canal Bank v. 
Judson, 8 N. Y. 254; Reed v. Vaughn, 10 Mo. 447. But when 
the want of jurisdiction appears on the face of the petition in 
bankruptcy, the consent of the parties cannot give jurisdiction, 
and the court of its own motion should take notice of the point. 
Hopkins v. Carpenter, 18 N. B. R. 339, Fed. Cas. No. 6,686. A 
stranger to a bankruptcy proceeding may come into it volun- 
tarily by petition or other appropriate method, and submit to 
the bankruptcy court his rights touching property in the cus- 
tody of the court claimed as assets by the trustee in bankruptcy. 
In re Anderson, 23 Fed. 482. A proceeding in involuntary 
bankruptcy is not one for the recovery of a creditor's debt, but 
to secure a distribution of the debtor's property among all his 
creditors; and therefore the prosecution of an action by the 
creditor for the recovery of his debt is not a bar to his proceed- 
ing against the debtor in bankruptcy. In re Henderson, 9 
Fed. 196. 

Ancillwry Jurisdiction. 

Any district court of the United States may, in the exercise 
of its ancillary jurisdiction, and in aid of the court in which 
proceedings are pending, grant injunctions, stay proceedings, 
enforce the provisions of composition resolutions, or ad- 
minister other summary relief as a court in bankruptcy, as 
to persons or property within the district, if the relief sought 
is such as the court in which the proceedings are pending 
would grant if the person or property to be affected were 
within reach of the process of that court, provided that court is 
disabled from giving the same relief by reason of the persons or 
property not being subject to its process. In re Tifft, 19 N. B. 
R. 201, Fed. Cas. No. 14,034; McGehee v. Hentz, 19 N. B. R. 
136, Fed. Cas. No. 8,794; Moore v. Jones, 23 Yt. 739, Fed. Cas. 



10 CEEATION OF COURTS OF BANKRUPTCY. (Ch. 2 

No. 9,768; Sherman v. Bingham, 3 Cliff. 552, Fed. Cas. No. 
12,762. 

Power to Restrain State Courts. 

Eev. St. U. S. § 720, provides that "the writ of injunction 
shall not be granted by any court of the United States to 
stay proceedings in any court of a state, except in cases where 
such injunction may be authorized by any law relating to 
proceedings in bankruptcy." The bankruptcy act provides 
that "a suit which is founded upon a claim from which a 
discharge would be a release, and which is pending against a 
person at the time of the filing of a petition against him, 
shall be stayed until after an adjudication or the dismissal 
of the petition." And further, the courts of bankruptcy 
are given power to "make such orders, issue such process, 
and enter such judgments as may be necessary for the enforce- 
ment of the provisions of this act." Under these provisions, 
when the bankruptcy law cannot be properly administered by 
the court having jurisdiction, in consequence of the inter- 
ference of a state court and its determination to adjudicate 
upon the rights of parties and property in the bankruptcy 
court, the latter ought not to hesitate to assert its authority; 
for in this matter the courts of the United States and the 
courts of the state are not of co-ordinate authority, but the 
federal court is superior. In re Miller, 6 Biss. 30, Fed. Cas. 
No. 9,551, per Drummond, J. But after process of execution 
issuing from a state court has been executed by a sale of the 
bankrupt's property, it is too late for the bankruptcy court 
to interfere by injunction or otherwise, the purchaser having 
acquired a good title. In re Fuller, 1 Sawy. 243, Fed. Cas. 
No. 5,148. And a bankrupt, after litigating for five years 
and to a final decree an action in the state court, cannot have 
an injunction from the federal court against the execution 
of such decree, on the ground that the assignee in bankruptcy 
was joined as a party to such action without leave of the 



§ 2) JURISDICTION. 11 

bankruptcy court. Price v. Price, 48 Fed. 823. The state 
courts have no jurisdiction, for fraud or any other cause, to 
interfere with or set aside a sale of the bankrupt's property 
by the trustee in bankruptcy. Akins v. Stradley, 51 Iowa, 
414, 1 N. W. G09. 

Marshaling of Assets. 

Where a creditor held several judgment notes of his debtor, 
and also some mortgages and two insurance policies as col- 
lateral, and caused judgment to be entered on the notes and 
execution to be issued thereon, and shortly afterward a peti- 
tion was filed against the debtor and he was adjudged a bank- 
rupt, it was held that the court had power so to marshal the 
assets as to require the creditor to foreclose a mortgage be- 
fore resorting to the general fund. In re Sauthoff, 7 Biss. 
167, Fed. Cas. No. 12,379. The fact that the bankruptcy 
court has power to ascertain and liquidate all liens and other 
specific claims on the bankrupt's estate, and to compel all 
lien-holders to appear and submit their claims, does not neces- 
sarily imply that this jurisdiction must be exercised in all 
cases. If the trustee and the general creditors are satisfied 
that a given debt against the bankrupt is valid, and that the 
property upon which it is secured is of no more value than is 
sufficient to pay it, it may be abandoned to the creditor hold- 
ing the lien. Second Nat. Bank of Louisville v. Nat. State 
Bank, 10 Bush, 367. And see The Ironsides, 4 Biss. 518, 
Fed. Cas. No. 7,069. 

Svfm.mary and Equitable Powers of Bankruptcy Courts. 

The bankruptcy court is always open and has no separate 
terms, and may therefore re-examine any order or decree 
made in the cause at any time and vacate it or set it aside on 
a proper showing, provided no vested rights are thereby dis- 
turbed. Boutwell V. Allderdice, 2 Hughes, 121, Fed. Cas. 
No. 1,708. The design with which a summary power so ex- 



12 CREATION OF COURTS OF BANKRUPTCY. (Ch. 2 

tended and comprehensive was conferred upon the district 
courts in this connection was undoubtedly to facilitate the 
dispatch of bankruptcy business and bring the cases to a 
speedy termination. This, indeed, is the obvious policy and 
intent of the whole statute. It has been broadly stated that 
the bankruptcy courts are authorized by summary proceed- 
ings to administer all the relief which a court of equity could 
administer under the like circumstances upon regular pro- 
ceedings. In re Wallace, Deady, 433, Fed. Oas. No. 17,094; 
Ex parte Poster, 2 Story, 131, Fed. Oas. No. 4,960. So, the 
court has summary jurisdiction over all contracts made with 
itself respecting the bankrupt's property, such as (in this case) 
a forthcoming bond for goods seized by the direction of the 
court in the hands of a third person as assets of the estate. 
Eosenbaum v. Garnett, 3 Hughes, 662, Fed. Gas. No. 12,053. 
So, any claimant may proceed, if he so chooses, by summary 
petition against the trustee in bankruptcy in respect to any 
funds in the latter's hands; for the trustee is an officer of the 
court and his possession is that of the court. Ferguson v. 
Peckham, 6 N. B. E. 569, Fed. Gas. No. 4,741; In re Evans, 
1 Low. 525, Fed. Gas. No. 4,551. The converse, however, is 
not the case; the trustee has no right to take similar action 
against third persons. Id. Again, the summary jurisdic- 
tion of the court extends to the ascertainment and liquidation 
of an alleged lien. Samson v. Clarke, 6 N. B. E. 108. And 
the trustee may proceed by summary petition to have an or- 
der for a sale declared null and void. In re Major, 14 N. B. 
E. 71, Fed. Gas. No. 8,981. But, on the other hand, jurisdic- 
tion to foreclose mortgages upon the bankrupt's estate is not 
included in the powers to be exercised summarily, (In re 
Casey, 10 Blatchf. 376, Fed. Gas. No. 2,495) nor for the sale 
of property which is not in the trustee's possession but in 
that of receivers appointed bv a state court who are not made 
parties to the petition. Bradley v. Healey, 1 Holmes, 451, 
Fed. Cas. No. l.TSl. And aw, generally. In re Ulrich, 6 Ben. 



§ 2) JURISDICTION. 13 

483, Fed. Cas. No. 14,328; In re Kirtland, 10 Blatchf. 515, 
Fed. Cas. No. 7,851. The jurisdiction of the courts of bank- 
ruptcy extends as well to bills in equity on behalf of the trus- 
tee, in regard to the recovery of assets, as to actions at law. 
Flanders v. Abbey, 6 Biss. 16, Fed. Cas. No. 4,851. 

Jurisdiction as Dependent on Residence. 

Under the terms of the statute, the residence or domicile 
of the bankrupt within the territorial jurisdiction of the court, 
or his having carried on business within the district, for the 
prescribed period of time before the filing of a petition against 
him, is an essential jurisdictional fact, without the existence 
of which the court will have no authority to proceed; or, in 
other words, it is the fact which determines the court in 
which the proceedings are to be taken. In re Leighton, 4 
Ben. 457, Fed. Cas. No. 8,221; In re Little, 3 Ben. 25, Fed. 
Cas. No. 8,391; In re Palmer, 1 N. B. R. 213, Fed. Cas. No. 
10,680; Fogarty v. Gerrity, 1 Sawy. 233, Fed. Cas. No. 4,895. 
See In re Burton, 9 Ben. 324, Fed. Cas. No. 2,214. Under the 
act of 1867, it was held that the proceedings in involuntary 
bankruptcy must be instituted with reference to the debtor's 
actual residence, or the place where he carries on his busi- 
ness, and not with regard to his domicile ; the two terms not 
being synonymous as used in the bankruptcy law. And 
hence, where a person, resident with his family in one place, 
bought a stock of goods in another, and went there for busi- 
ness, leaving his family in the former place, it was held that 
the petition was properly filed in the place where he trans- 
acted such business. In re Watson, 4 N. B. R. 613, Fed. Cas. 
No. 17,272. In a case where the petitioner in voluntary bank- 
ruptcy had lived with his father in New Jersey for four years, 
and had kept books for a firm in New York City for six months 
prior to filing his petition in the southern district of New 
York, it was held that that court had no jurisdiction. In re 
Magie, 2 Ben. 369, Fed. Cas. No. 8,951. But a fugitive from 



14 CREATION OF COURTS OF BANKEUPTCY. (Ch. 2 

justice, whose domicile was within a given district at the time 
of his flight, and who has acquired no domicile elsewhere, 
may be proceeded against in such district after his flight. 
Cobb V. Rice, 130 Mass. 231. 

Jurisdiction of Corporations. 

Where the same corporation enjoys a corporate existence, 
by legislative authority, in two states at once, and successive 
petitions in bankruptcy are filed against it in the federal 
courts within each of those states, that court which first ac- 
quires jurisdiction by the filing of a petition will retain it to 
the exclusion of the other, and must be permitted to exer- 
cise its jurisdiction to the fullest extent without interference 
by any other court. In re Boston, H. & E. R Co., 9 Blatchf. 
101, Fed. Cas. No. 1,677. The district court has power to 
declare a corporation bankrupt although it has previously 
been dissolved by a decree of a state court. In re New Am- 
sterdam Ins. Co., 6 Ben. 368, Fed. Cas. No. 10,140. A cor- 
poration, subject to the provisions of the bankruptcy law, 
which has committed an act of bankruptcy, and is in existence 
when the petition against it is filed, and when the proper 
papers are served on its proper officer, cannot oust the juris- 
diction of the bankruptcy court to proceed, on the return day, 
to an adjudication, because a decree dissolving the corpora- 
tion has been made after such service and before such return 
day. Piatt v. Archer, 9 Blatchf. 559, Fed. Cas. No. 11,213. 

Appoimtment of Recevuer. 

Among the enumerated powers of the courts of bankruptcy 
is the power to "appoint receivers, or the marshals, upon ap- 
plications of parties in interest, to take charge of the property 
of bankrupts after the filing of the petition and until it is dis- 
missed or the trustee is qualified." There was no provision 
in the act of 1867 expressly authorizing the appointment of 
receivers by the bankruptcy court; but it was held to be 



§ 2) JURISDICTION, 15 

within the general equity powers of a court of bankruptcy, 
after an adjudication and before the selection of a trustee, to 
appoint a receiver for the temporary care and custody of the 
estate, when special circumstances rendered it desirable. 
Lansing v. Manton, 14 N. B. E. 127, Fed. Gas. No. 8,077; Sedg- 
wick V. Place, 3 Ben. 360, Fed. Gas. No. 12,619. For example, 
a receiver may be appointed where the apparent titles to 
property are such on their face that the marshal cannot act 
eflflciently under the usual warrant. Keenan v. Shannon, 9 
N. B. B. 441, Fed. Gas. No. 7,640. But no appointment will 
be made unless the party alleged to hold the property ad- 
versely to the complainant is served with process (Hyslop v. 
Hoppock, 5 Ben. 447, Fed. Gas. No. 6,988), nor where, upon 
. the hearing of the motion, it is not apparent that the ultimate 
determination of the suit in favor of the complainant is rea- 
sonably probable. Wilkinson v. Dobbie, 12 Blatchf. 298, Fed. 
Gas. No. 17,670, 

Power to Call in Stock Svbscnptions. 

The court of bankruptcy has jurisdiction and authority to 
order delinquent stockholders of a corporation to pay up their 
subscriptions to the capital stock, and if they fail to do so, 
the trustee has the same right of action that the corporation 
itself would have had to compel such payment. Sanger v. 
Upton, 91 U. S. 56; In re Eepublic Ins. Go., 3 Biss. 452, Fed. 
Gas. No. 11,704; Payson v. Stoever, 2 Dill. 427, Fed. Gas. No. 
10,863. And a provision in the subscription and in the stock 
certificate that the balance was to be paid on the call of the 
directors, "when ordered by a vote of a majority of the stock- 
holders themselves," does not prevent the effectual exercise 
of this power by the court ; as a court of equity it has all the 
power of. the directors, or the stockholders, or both collec- 
tively. Upton V. Hansbrough, 3 Biss. 417, Fed. Gas, No, 16,- 
801. 



16 BANKRUPTS. (Ch. 3 

CHAPTER in. 

BAiTKRUPTS, 
ACTS OF BANKBUPTCT. 

§ 3. a Acts of bankruptcy by a person shall con- 
sist of his having (1) conveyed, transferred, con- 
cealed, or removed, or permitted to be concealed 
or removed, any part of his property with intent 
to hinder, delay, or defraud his creditors, or any 
of them; or (S) transferred, while insolvent, any 
portion of his property to one or more of his cred- 
itors w^ith intent to prefer such creditors over his 
other creditors; or (3) suffered or permitted, while 
insolvent, any creditor to obtain a preference 
through legal proceedings, and not having at least 
five days before a sale or final disposition of any 
property affected by such preference vacated or dis- 
charged such preference ; or (4) made a general as- 
signment for the benefit of his creditors ; or (5) ad- 
mitted in writing his inability to pay his debts and 
his willingness to be adjudged a bankrupt on that 
ground. 

b A petition may be filed against a person w^ho is 
insolvent and w^ho has committed an act of bank- 
ruptcy -within four months after the commission of 
such act. Such time shall not expire until four 
months after (1) the date of the recording or regis- 
tering of the transfer or assignment w^hen the act 
consists in having made a transfer of any of his 
property with intent to hinder, delay, or defraud 
his creditors or for the purpose of giving a prefer- 



§ 3) ACTS OF BANKRUPTCY. 17 

ence as hereinbefore provided, or a general assign- 
ment for the heneflt of his creditors, if by larvr such 
recording or registering is required or permitted, 
or, if it is not, from the date -when the beneficiary 
takes notorious, exclusive, or continuous possession 
of the property unless the petitioning creditors 
have received actual notice of such transfer or as- 
signment. 

It shall be a complete defense to any proceed- 
ings in bankruptcy instituted under the first sub- 
division of this section to allege and prove that the 
party proceeded against -was not insolvent as de- 
fined in this act at the time of the filing the peti- 
tion against him, and if solvency at such date is 
proved by the alleged bankrupt the proceedings 
shall be dismissed, and under said subdivision one 
the burden of proving solvency shall be on the al- 
leged bankrupt. 

d Whenever a person against whom a petition 
has been filed as hereinbefore provided under the 
second and third subdivisions of this section takes 
issue with and denies the allegation of his insol- 
vency, it shall be his duty to appear in court on the 
hearing, with his books, papers, and accounts, and 
submit to an examination, and give testimony as 
to all matters tending to establish solvency or in- 
solvency, and in case of his failure to so attend 
and submit to examination the burden of proving 
his solvency shall rest upon him. 

e Whenever a petition is filed by any person for 
the purpose of having another adjudged a bank- 
rupt, and an application is made to take charge of 
and hold the property of the alleged bankrupt, or 
any part of the same, prior to the adjudication and 

BL. BANK.— 2 



18 BANKRUPTS. (Ch. 3 

pending a hearing on the petition, the petitioner or 
applicant shall file in the same court a bond -with 
at least two good and sufficient sureties who shall 
reside within the jurisdiction of said court, to be 
approved by the court or a judge thereof, in such 
sum as the court shall direct, conditioned for the 
payment, in case such petition is dismissed, to the 
respondent, his or her personal representatives, all 
costs, expenses, and damages occasioned by such 
seizure, taking, and detention of the property of 
the alleged bankrupt. 

If such petition be dismissed by the court or -with- 
drawn by the petitioner, the respondent or respond- 
ents shall be allow^ed all costs, counsel fees, ex- 
penses, and damages occasioned by such seizure, 
taking, or detention of such property. Counsel 
fees, costs, expenses, and dam.ages shall be fixed 
and allowed by the court, and paid by the obligors 
in such bond. 

ACTS OF BANKRUPTCY. 

InsoVuency of Debtor. 

It will be observed that some of the acts of bankruptcy 
enumerated in the statute can be committed only by a person 
who is insolvent. As the term was used in former laws on 
the subject of bankruptcy, "insolvency" was defined as the 
inability to pay one's debts and meet his engagements as they 
matured in the usual and ordinary course of his business as 
persons in trade usually do. But the first section of the pres- 
ent act (clause 15) declares that a person shall be deemed "in- 
solvent," within the provisions of the act, when the aggregate 
of his property, excluding such as he may have fraudulently 
conveyed or transferred, or concealed or removed, shall not 
be sufladent in amount, at a fair valuation, to pay his debts. 



§ 3) ACTS OF BANKRriPTCY. 19 

The failure to pay a single debt when due, it is said, is not 
sufficient to establish the fact of insolvency. Driggs v. Moore, 
1 Abb. (U. S.) 440, Fed. Cas. No. 4,083. 

Fraudulent Con/veyances. "- 

A conveyance, sale, transfer, or assignment of property 
which is fraudulent at common law is an act of bankruptcy; 
and so is every conveyance or assignment which contravenes 
the objects and provisions of the bankruptcy law, although 
it might have been good at common law. Gassett v. Morse, 
21 Vt. 627, Fed. Cas. No. 5,264. Thus, a sale of a stock in 
trade, in gross, without invoice, at night, and for cash, is not 
a sale made in the ordinary course of business, and may be 
an act of bankruptcy. Davis v. Armstrong, 3 N. B. R. 33, 
Fed. Cas. No. 3,624. But a sale of property by a person who 
is in fact insolvent is not necessarily, and without regard to 
its character, void under the bankruptcy law. If it was 
made in good faith and for the honest purpose of discharging 
a debt, and in the confident expectation that by so doing the 
person could continue his business, it will be upheld. But 
if he made it to avoid the provisions of the bankruptcy act, 
and to withdraw his property from its control, and the vendee 
either knew or had reasonable cause to believe that the ven- 
dor's intention was of this character, it will be avoided. Tif- 
fany V. Lucas, 15 Wall. 410. The sale of a stock of goods 
will not be considered an act of bankruptcy where the only 
object of the seller was to change his business, and the pur- 
chaser acted in good faith. In re Valliquette, 4 N. B. K. 
307, Fed. Cas. No. 16,823. It is not an act of bankruptcy 
for a railroad corporation to convey its property in trust to 
secure bonds to be issued and sold, and the proceeds to be 
applied to pay all its unsecured debts, the same being done 
in good faith and with a view to enable the company to con- 
tinue its legitimate business, though it may be technically 
insolvent, or likely soon to be so. In re Union Pac. K. Co., 



20 BANKRUPTS. (Ch. 3 

10 N. B. E. 178, Fed. Cas. No. 14,376. Again, where a person 
who is solvent agrees to transfer certain property to another 
as collateral security for advances made, but the transfer is 
not then completed, and subsequently, after he becomes in- 
solvent, the transfer is concluded in pursuance of the agree- 
ment, this is not an act of bankruptcy. Ex parte Potts, 
Crabbe, 469, Fed. Cas. No. 11,344. ^ The giving of a mortgage 
by an infant is not an act of bankruptcy, because it is not an 
absolute transfer, but is subject to his election to aflSrm or 
disaffirm it when he comes of age. In re Derby, 6 Ben. 232, 
Fed. Cas. No. 3,815. The subject of fraudulent gifts or trans- 
fers of the debtor's property, the suffering or procuring judg- 
ments to be entered against him, and the creation of illegal 
preferences, will be more fully discussed in connection with 
the subject of the discharge of the bankrupt and the several 
grounds of opposition to such discharge. 

Assignment for Benefit of Creditors. 

In this country it is well settled upon the authorities that 
a general assignment made by an insolvent debtor under the 
state laws, in contemplation of bankruptcy, is an act of bank- 
ruptcy, although it embraces all his property, and purports* to 
be made for the equal benefit of all his creditors, and creates 
or intends no preferences, and is free from fraud, and al- 
though he denies any intention to evade or defeat the bank- 
ruptcy act; and such assignment is void or voidable as 
against the trustee in bankruptcy, because its necessary ef- 
fects and consequences are to withdraw the estate from the 
administration of the court of bankruptcy, and so to obstruct 
or defeat the operation of the law. Boese v. King, 108 U. S. 
379, 2 Sup. Ct. 765; In re Burt, 1 Dill. 439, Fed. Cas. No. 
2,210; Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; 
In re Beisenthal, 14 Blatchf. 146, Fed. Cas. No. 1,236; In re 
Frisbee, 14 Blatchf. 185, Fed. Cas. No. 5,129; In re Croft, 
8 Biss. 188, Fed. Cas. No. 3,404; In re Smith, 4 Ben. 1, Fed. 



§ 3) ACTS OF BANKRUPTCY. 21 

Cas. No. 12,974; Globe Ins. Co. v. Cleveland Ins. Co., 14 N. B. 
R. 311, Fed. Cas. No. 5,486; Barnes v. Rettew, 8 Phila. 133, 
Fed. Cas. No. 1,019; McLean v. Johnson, 3 McLean, 202, Fed 
Cas. No. 8,883; McLean v. Meline, 3 McLean, 199, Fed. Cas. 
No. 8,890; In re Randall, Deady, 557, Fed. Cas. No. 11,551 
Jackson v. McCulloch, 13 N. B. R. 283, Fed. Cas. No. 7,140 
Barton v. Tower, 1 N. Y. Leg. Obs. 8, Fed. Cas. No. 1,085; 
In re Chamberlain, 3 N. B. R. 710, Fed. Cas. No. 2,574; Perry 
V. Langley, 1 N. B. R. 559, Fed. Cas. No. 11,006; Jones v. 
Sleeper, 2 N. Y. Leg. Obs. 131, Fed". Cas. No. 7,496. It is 
presumed that the debtor intended to delay or defeat the 
operation of the bankruptcy law upon him ; his denial has no 
rebutting force; he is presumed to intend the necessary con- 
sequences of his own acts. In re Smith, 4 Ben. 1, Fed. Cas. 
No. 12,974. And the fact that an assignment for the benefit 
of creditors is defectively executed does not make it any the 
less an act of bankruptcy. In re Lawrence, 10 Ben. 4, Fed. 
Cas. No. 8,133; In re Mendelsohn, 3 Sawy. 342, Fed. Cas. No. 
9,420. So an application by a debtor for the benefit of a 
state insolvency law is an act of bankruptcy. Van Nostrand 
V. Carr, 30 Md. 128. But if the assignment be made more 
than six months (now four) before proceedings in bankruptcy 
are taken against the debtor, his trustee cannot assail the 
assignment nor claim the property from the assignee. Mayer 
V. Hellman, 91 U. S. 496. 

Giving a Preference. 

Where an insolvent trader gives a mortgage to one of his 
creditors, in contemplation of bankruptcy, and for the pur- 
pose of giving such creditor a preference over the others, it 
is an act of bankruptcy within the meaning of the statute. 
Arnold v. Maynard,' 2 Story, 349, Fed. Cas. No. 561 ; Baldwin 
V. Rosseau, 1 N. Y. Leg. Obs. 391, Fed. Cas. No. 803. A 
creditor who knows his debtor to be insolvent may sue him, 
and proceed to judgment, and take his property on legal pro- 



22 BANKRUPTS. (Ch. 3 

cess, in such a manner as would operate to give a preference 
to himself if carried into full execution, and may then allege 
these facts as an act of bankruptcy and have the debtor ad- 
judicated a bankrupt. Coxe v. Hale, 10 Blatchf. 56, Fed. 
Cag. No. 3,310. And a preference in contemplation of bank- 
ruptcy is no less an act of bankruptcy because j-ielded to the 
threats and coercion of the creditor. Atkinson v. Farmers' 
Bank, Crabbe, 529, Fed. Gas. No. 609. "SufEering his prop- 
erty to be taken on legal process with intent to give a pref- 
erence" is an act of bankruptcy although the debtor did not 
know that there was any such law as the bankruptcy law in 
existence, and therefore could not have directly intended to 
defeat or evade it. In re Craft, 2 Ben. 2U, Fed. Gas. No. 
3,316. 

Sufferwig Creditor to Obtain Preference hy Legal JProceed- 
vngs. 

It is declared to be an act of bankruptcy if the debtor, while 
insolvent, shall have "suffered or permitted any creditor to 
obtain a preference through legal proceedings," provided the 
debtor does not, "at least five days before the sale or final dis- 
position of any property affected by such preference," vacate 
or discharge the preference. In construing a similar provi- 
sion in the act of 1867, it was held that something more than 
passive non-resistance on the part of an insolvent debtor is 
necessary to invalidate a judgment and levy on his property 
when the debt is due and he has no defense. In such a case, 
there is no legal obligation on the debtor to file a petition in 
bankruptcy to prevent the judgment and levy, and a failure to 
do so is not sufficient evidence of an intent to give a prefer- 
ence to the judgment creditor, or to defeat the operation of the 
bankruptcy law. But very slight circumstances which tend to 
show the existence of an affirmative desire on the part of the 
bankrupt to give a preference or to defeat the operation of 
the act may, by giving color to the whole transaction, render 



§ 3) ACTS OP BANKRUPTCY. 23 

the lien void. Wilson r. City Bank, 17 Wall. 473. In decid- 
ing the question whether the giving of a warrant of attorney 
to confess judgment is an act of bankruptcy, the character 
of the alleged bankrupt's business may be taken into consid- 
eration ; and where it appears that the purpose of the warrant 
of attorney may have been to enable the debtor to continue 
his business, and that there was no intention to defeat or 
delay the operation of the bankruptcy law, it is not a suffi- 
cient ground for an adjudication of bankruptcy. In re Leeds, 
6 Phila. 468, Fed. Cas. Xo. 8,205. The giving by a debtor, 
for a consideration of equal value, of a warrant of attorney 
to confess judgment is not an act of bankruptcy, though the 
warrant is not recorded, but kept in the creditor's custody 
unknown to others. Blabon v. Hunt, 26 Pittsb. Leg. J. 180, 
Fed. Cas. No. 1,455. 

Concealing Property. 

Under this clause, it has been helcl that the secreting or 
concealment of goods which constitutes an act of bankruptcy, 
distinct from a fraudulent conveyance of them, must be an 
actual, not a constructive, concealment of them by the bank- 
rupt himself, or by his procurement, while they continue, in 
his intention, his own goods. Livermore v. Bagley, 3 Mass. 
487. And see Fox v. Eckstein, 4 N. B. K. 373, Fed. Cas. No. 
5,009. But the better opinion seems to be that procuring an 
attachment upon a fictitious debt, in order to forestall or 
prevent an attachment by a bona fide creditor, comes fairly 
within the language of this clause; because the words mean 
not only the physical removal or concealment of property, 
but also the concealment of the actual title and position of 
the property of whatever kind. In re Williams, 3 N. B. R. 
286, Fed. Cas. No. 17,703; In re Hussman, 2 N. B. E. 437, 
Fed. Cas. No. 6,951. And see O'Neil v. Glover, 5 Gray, 144, 
159; Anonymous, 1 Pac. Law Eep. 173, Fed. Cas. No. 466, 



24 BANKRUPTS. (Ch. 3 

YolvmAcvry Petition as Act of Banhruptcy. 

The act of 1867 contained a clause providing that the filing 
of a voluntary petition in bankruptcy should constitute an 
act of bankruptcy. No such provision is found in the present 
statute; but since it is made an act of bankruptcy if the 
debtor shall have "admitted in writing his inability to pay 
his debts and his willingness to be adjudged a bankrupt on 
that ground," it is probable that the filing of a voluntary pe- 
tition will be held to produce the same result. In relation 
to this clause in the earlier statute, it was said: "He does 
not become a bankrupt by the adjudication, but he becomes 
one by the filing of the petition, provided that adjudication 
is afterwards made. The adjudication is merely a certificate 
or order made by an authorized officer to the effect that the 
petitioner became a bankrupt by the filing of his petition." 
In re Patterson, 1 Ben. 517, Fed. Cas. No. 10,815. As the 
filing of the petition is an act of bankruptcy, a single creditor 
cannot resist the adjudication by plea and proof that the 
debtor is really able to pay his debts. In re Fowler, 1 Low. 
161, Fed. Cas. No. 4,998. 

Acts of Banhruptcy hy Corporation. 

The appointment by a state court of a receiver to take pos- 
session of the property and assets of a coi-poration is a ''tak- 
ing on legal process," within the meaning of the bankruptcy 
law. "The receiver of a court of chancery is its executive 
officer, as much so, to all intents and purposes, as a sheriff 
of a court of law; and the goods or property in his hands are 
as much in the custody of the law as if levied upon under 
an execution or attachment." In re Merchants' Ins. Co., 3 
Biss. 162, Fed. Cas. No. 9,441. 



§ 4) WHO MAY BECOME BANKRUPTS. 25 

WHO MAY BECOME BANKRUPTS. 

§ 4. a Any person -wrho owes debts, except a cor- 
poration, shall be entitled to the benefits of this 
act as a voluntary bankrupt. 

b Any natural person, except a -wage-earner or a 
person engaged chiefly in farming or the tillage of 
the soil, any unincorporated company, and any 
corporation engaged principally in manufacturing, 
trading, printing, publishing, or mercantile pur- 
suits, owing debts to the amount of one thousand 
dollars or over, may be adjudged an involuntary 
bankrupt upon default or an impartial trial, and 
shall be subject to the provisions and entitled to 
the benefits of this act. Private bankers, but not 
national banks or banks incorporated under state 
or territorial la-ws, may be adjudged involuntary 
bankrupts. 

WHO ARE SUBJECT TO BANKRUPTCY LAW. 

Voluntary Bankruptcy. 

An alien may file his own petition in bankruptcy as soon 
as he has acquired the necessary residence in the United 
States. In re aoodfellow, 1 Low. 510, Fed. Gas. No. 5,536. 
Where a petition in involuntary bankruptcy was filed, and 
the debtor, before adjudication, filed his voluntary petition 
and was duly adjudged a bankrupt, it was held that the pend- 
ency of the first proceeding was no bar to the institution of 
the second, and that the court would proceed in the latter, 
and the further prosecution of the former would be stayed- 
In re Flanagan, 5 Sawy. 312, Fed. Gas. No. 4,850. But if 
the debtor files two successive petitions, setting forth the 
same debts, proceedings under the second will not be allowed 



26 BANKRUPTS. (Ch. 3 

to continue while the first is still pending. In re Wielarski, 
4 Ben. 468, Fed. Cas. No. 17,619. The debtor may appro- 
priate so much of his effects as may be necessary to raise the 
means to maintain his application in bankruptcy. Flournoy 
V. Newton, 8 Ga. 306. As to whether infants, lunatics, and 
married women may take advantage of the bankruptcy law, 
or are amenable to its provisions in proceedings in invitum, 
see, infra, further notes to this section. 

A state court will not grant an injunction to restrain a 
debtor from applying for the benefit of the national bank- 
ruptcy law. Fillingin v. Thornton, 49 Ga. 384. 

A voluntary bankrupt may be allowed, for good reasons 
shown, to withdraw his petition at any time before adjudi- 
cation. Ex parte Bennett, 1 Pa. Law J. 145, Fed. Cas. No. 
1,309; Dudley's Case, 1 Pa. Law J. 302, Fed. Cas. No. 4,114; 
In re Randall, 5 Law Rep. 115, Fed. Cas. No. 11,550. But 
this he cannot claim as a matter of right; he cannot with- 
draw his petition, if any of the creditors oppose it, at his own 
pleasure or without showing good cause therefor. In re Har- 
ris, 3 N. Y. Leg. Obs. 152, Fed. Cas. No. 6,110. Before an 
adjudication has been made, it is within the sound discretion 
of the cour-t whether to dismiss or retain the petition. In re 
Randall, 5 Law Rep. 115, Fed. Cas. No. 11,550. But after an 
adjudication, it seems that it cannot be dismissed without the 
concurrence and assent of all the creditors. In re Gile, 5 
Law Rep. 224, Fed. Cas. No. 5,423. 

Infants. 

It has been held that an infant is entitled to the benefit 
of the bankruptcy act, and that the proceedings may be had 
in his own name; the intervention of a guardian or next 
friend is not necessary. In re Book, 3 McLean, 317, Fed. 
Cas. No. 1,637. But the better opinion appears to be that 
an infant cannot be adjudged a bankrupt either on his own 
petition or on an adverse petition. Nor can he come into 



§ 4) WHO MAY BECOME BANKRUPTS. 27 

court after attaining majority, and, by presenting a petition 
to that effect, ratify and confirm involuntary proceedings be- 
gun against him during his minority. The court never 
acquired jurisdiction over him, and jurisdiction cannot be 
conferred upon it by any such retroactive process. In re 
Derby, 6 Ben. 232, Fed. Cas. No. 3,815. In Massachusetts, 
it has been held that proceedings in insolvency (under the 
state law) against an infant, who is not represented by a 
guardian ad litem, are void. Farris v. Richardson, 6 Allen, 
118. Whether such proceedings would be good if the minor 
were represented by a guardian was doubted but not decided 
in this case. But a person against whom and his partner 
proceedings in insolvency have been instituted under such 
law, cannot avoid them on the ground that his partner was 
an infant when the proceedings were begun, if the infant 
was then represented by a guardian ad litem and has ratified 
the proceedings after coming of age. Winchester v. Thayer, 
129 Mass. 129. 

Lunatics. 

The disabilities of a lunatic or insane person are such that 
he cannot commit an act of bankruptcy, and consequently 
he cannot be adjudged a bankrupt for any acts or transac- 
tions of his done or committed during his insanity. In re 
Marvin, 1 Dill. 178, Fed. Cas. No. 9,178; In re Weitzel, 7 
Biss. 289, Fed. Cas. No. 17,365. But if a person, being at the 
time sane, commits such acts as make him amenable to the 
operation of the bankruptcy law, he may be adjudged a 
bankrupt upon compulsory proceedings, notwithstanding his 
supervening insanity; for a commission of bankruptcy is as 
much an action as any other species of proceeding, and the 
fact of lunacy, under the circumstances supposed, could not 
be pleaded in defense of an action at law. Shelf ord, Lunat. 
429; Anonymous, 13 Ves. 590; Ex parte Stamp, 1 De Gex, 
345; In re Pratt, 2 Low. 96, Fed. Cas. No. 11,371; In re 



28 BANKRUPTS. (Ch. 3 

Marvin, 1 Dill. 178, Fed. Cas. No. 9,178. Nor is the consent 
of the lunatic's guardian or committee essential to the peti- 
tion. In re Weitzel, 7 Biss. 289, Fed. Cas. No. 17,3©5. The 
fact that a person has been declared a lunatic by the proper 
court of the state of his domicile, and a guardian appointed 
for him, will not invalidate the action of the bankruptcy 
court in subsequently passing an adjudication of bankruptcy 
upon him on his own petition; for the decree of the state 
court merely establishes that he was insane at the time it 
was made, and does not exclude the supposition that he may 
since have become sane. Saunders v. Mitchell, 61 Miss. 321. 

Married Women. 

There has been some doubt and uncertainty as to the 
power of courts of bankruptcy to proceed against married 
women; but the true rule on this subject appears to be 
that the federal court, when called upon to adjudge a feme 
covert bankrupt, must regard the laws of the state of her 
domicile; and if, in that state, by enabling statutes, her 
common-law disabilities have been taken away to such an 
extent as to allow her to make valid and enforceable con- 
tracts in the way of trade or business, then she is amenable 
to the bankruptcy law, — that in any case where a plea of 
coverture would not avail her in an action on the debt, she 
may be proceeded against in bankruptcy. These views are 
supported by both the English and American cases. Lavie 
V. Phillips, 3 Burrows, 1783; Johnson v. Gallagher, 3 De 
Gex, F. & J. 494; In re Matthewman, L. E. 3 Eq. 781; Picard 
V. Hine, L. R. 5 Ch. App. 274; McHenry v. Davies, L. E. 10 
Eq. 88; In re Kinkead, 3 Biss. 405, Fed. Cas. No. 7,824; In 
re Lyons, 2 Sa'W'j'. 524, Fed. Cas. No. 8,649; In re Collins, 
3 Biss. 415, Fed. Cas. No. 3,006; In re O'Brien, 1 N. B. E. 
176, Fed. Cas. No. 10,397. And see an interesting review 
of the authorities on this point in 13 Am. Law Eeg. (N. S.) 
129. Thus, in Illinois, where a married woman has en- 
tire control of her separate estate, whether owned before 



§ 4) WHO MAY BECOME BANKRUPTS. 29 

marriage or since acquired, and may make contracts in re- 
spect to the same, enforceable either at law or in equity, 
and may engage in trade, using her own property, it was 
held that where she formed a business partnership with 
her husband, contributing her separate money to the capital 
of the concern and her time and skill to the management 
of its affairs, the firm might be adjudged bankrupt, and it 
was thought that the wife might be so adjudged individual- 
ly. In re Kinkead, 3 Biss. 405, Fed. Cas. No. 7,824. So, 
where a married woman was authorized by her husband to 
carry on business as a partner with other members of a 
firm, and was separate in property from her husband, it 
was held that it was not necessary to make the husband 
a party in a proceeding in involuntary bankruptcy against 
the firm. Lastrapes v. Blanc, 3 Woods, 134, Fed. Cas. No. 
8,100. But, on the other hand, if the statutes of the state 
have not removed the common-law disabilities of a mar- 
ried woman, so that she is still incompetent to contract, a 
petition in bankruptcy will not lie against her, at least 
where it is not shown that she has a separate estate. In 
re Goodman, 5 Biss. 401, Fed. Cas. No. 5,540. And in the 
case of In re Howland, 2 N. B. R. 357, Fed. Cas. No. 6,791, 
where a petition in involuntary bankruptcy was filed 
against a married woman, having a separate estate, founded 
on the nonpayment of certain promissory notes made by 
her, it was held that, inasmuch as it did not appear on the 
face of the notes that it was her intention to bind her sepa- 
rate estate, and there being no allegation that they were 
given for the benefit of the separate estate, or in the course 
of trade, the petition must be dismissed, but with permis- 
sion to amend. A married woman, where no fraud is in- 
tended, may take advantage of bankruptcy with respect to 
debts contracted while she was sole. Lawver v. Gladden 
(Pa. Sup.) 1 Atl. 659. 



30 BANKRUPTS. (fih. 3 

Corporations. 

By the express provisions of the act corporations are de- 
barred from taking the benefit of the act by the filing of a 
voluntary petition in bankruptcy. But the provisions for in- 
voluntary bankruptcy apply to unincorporated companies and 
to corporations "engaged principally in manufacturing, trad- 
ing, printing, publishing, or mercantile pursuits;" so that any 
company, incorporated or not, vs^hich answers to this descrip- 
tion, may be proceeded against under the statute, if it owes 
debts to the amount of one thousand dollars and has committed 
an act of bankruptcy. 

Under the bankruptcy law of 1867, where no specific ex- 
ceptions were made, but the law applied to "all moneyed, busi- 
ness, or commercial corporations and joint-stock companies," 
it was universally held that railroad companies must be in- 
cluded under the designation of "business corporations," and 
that they were therefore liable to be thrown into bankruptcy. 
ISTew Orleans, S. F. & L. R. Oo. v. Delamore, 114 U. S. 501, 5 
Sup. Ct. 1009. In this. case it was said: "The jurisdiction of 
the bankruptcy court to adjudicate a railroad company bank- 
rupt and to administer its property, under the bankruptcy act, 
has been sustained by several circuit courts of the United 
States. No circuit court before which the question has been 
brought has denied the jurisdiction. As they were the courts 
of last resort upon this question, and valuable rights may de- 
pend upon their judgments upon the point, we think the ques- 
tion should be considered as settled by the authorities cited, 
and are unwilling at this late day to re-examine it." And see 
In re Greenville & C. R. Co., 5 Chi. Leg. News, 124, Fed. Cas. 
No. 5,787; Alabama & 0. R. Co. v. Jones, 5 N. B. R. 97, Fed. 
Cas. No. 126; In re California Pac. R. Co., 3 Sawy. 240, Fed. 
Cas. No. 2,315; Rankin v. Florida, A. & G. C. R. Co., 1 N. B. 
R. 647, Fed. Cas. No. 11,567; In re Southern Minn. R. Co., 10 
N. B. R. 86, Fed. Cas. No. 13,188; In re Alabama & C. R. Co., 
9 Blatchf. 390, Fed. Cas. No. 124; Adams v. Boston, H. & E. 



§ 4) WHO MAY BECOME BANKRUPTS. 31 

R. Co., 1 Holmes, 30, Fed. Gas. No. 47; Sweatt v. Boston, H. & 
E. R. Co., 3 Cliff. 339, Fed. Cas. No. 13,684; Winter v. Iowa, 
M. & N. P. R. Co., 2 Dill. 487, Fed. Cas. No. 17,890. In the 
case of Alabama & C. R. Co. v. Jones, supra, it was observed 
tbat a corporation carrying on and pursuing any lawful busi- 
ness, defined and clothed by its charter with power to do so, is 
clearly a business corporation and amenable to the bankruptcy 
law, and that it secured to be the clear intent of the law to 
bring within its scope all corporations, except those organized 
for religious, charitable, literary, educational, municipal, or 
political purposes. But under the present statute, since a 
railroad company neither trades, manufactures, prints or pub- 
lishes, as the principal part of its business, it cannot be amen- 
able to the bankruptcy law, unless it should be considered that 
its business is a "mercantile pursuit," which the courts are not 
at all likely to hold. 

Insurance companies duly authorized under the laws of a 
state to transact the business of insurance, in any of its 
branches or departments, were held to be subject to the opera- 
tion of the bankruptcy law, since they plainly came within the 
general descriptions given in the statute of 1867; but whether 
this is also the case under the terms of the present act is more 
doubtful. See In re Merchants' Ins. Co., 3 Biss. 162, Fed. 
Cas. No. 9,441; In re Independent Ins. Co., 1 Holmes, 103, Fed. 
Cas. No. 7,017; In re Hercules Mut. Ins. Co., 6 Ben. 35, Fed, 
Cas. No. 6,402. 

Since the act declares that the word "persons" shall include 
corporations, service of process is to be made personally on a 
corporation by delivering a copy of the petition and order to 
show cause on its head or principal officers; and the "usual 
place of abode" must be construe^ to mean the principal place 
of business where alone it can be said to reside. In re Cali- 
fornia Pac. R. Co., 3 Sawy. 240, Fed. Cas. No. 2,315. A cor- 
poration, for all essential purposes, is as effectually dissolved by 
the commencement of proceedings in bankruptcy against it as 
if a solemn judgment were pronounced to that effect. It is 



BANKRUPTS. 



(Ch. 3 



such a dissolution as will afford creditors a remedy against the 
individual stockholders where they are made liable upon the 
dissolution of the corporation. State Savings Ass'n v. Kel- 
logg, 52 Mo. 583. Compare Holland v. Heyman, 60 Ga. 174. 

Trading Corporations. 

Bankruptcy laws were originally confined to such persons as 
were "traders" ; and former laws of the United States on this 
subject required that "traders" should keep books of account, 
in order to be entitled to a discharge. While this restriction is 
no longer in force, as respects natural persons, the present 
statute provides that proceedings in involuntary bankruptcy 
may be instituted against corporations which are "engaged 
principally in trading." The construction of this term should 
clearly be the same as that which was established under 
former bankruptcy laws, since it must be presumed that it was 
adopted by congress with an understanding and knowledge of 
what had previously been decided by the courts as to its mean- 
ing. Hence the decisions on the interpretation of the word 
"trader," made under the earlier statutes, will now be of im- 
portance and value. 

Among those who have been held to be "traders," within the 
meaning of the bankruptcy law, may be instanced the follow- 
ing: A baker, who buys flour which he makes into bread, 
and sells the bread to daily customers (In re Cocks, 3 Ben. 260, 
Fed. Gas. No. 2,933), a man who boards horses (In re Odell, 9 
Ben. 209, Fed. Cas. No. 10,426), a person who keeps a liquor 
saloon and sells there, for cash and on credit, at retail, cigars 
and liquors bought in quantity, partly on credit (In re Sher- 
wood, 9 Ben. 66, Fed. Cas. No. 12,773), a stair-builder, who buys 
nails, lumber, and other necessary materials, and works them 
into stairs for persons who give him orders for such stairs and 
pay him a gross price therefor (In re Garrison, 5 Ben. 430, Fed. 
Cas. No. 5,254). Also, within the meaning of the bankruptcy 
law, a butcher is a tradesman. In re Bassett, 8 Fed. 266. On 
the other hand, a man who speculates in stocks, buying and 



§ 4) WHO MAY BECOME BANKRUPTS. 33 

selling them throughbrokers, but not keeping an office for that 
purpose nor acting as a commission broker for others, is not a 
trader. In re Marston, 5 Ben. 313, Fed. Gas. No. 9,142; In re 
Woodward, 8 Ben. 563, Fed. Gas. No. 18,001. One who con- 
tracts with a railroad company to grade and build its road is 
not a merchant or trader. In re Smith, 2 Low. G9, Fed. Gas. 
No. 12,981. One who is engaged in farming and trading live 
stock is not within the act. In re Ragsdale, 7 Biss. 154, Fed. 
Gas. No. 11,530. A person who from time to time buys oil 
paintings and places them in a public gallery and sella them at 
auction, but is regularly engaged in a totally different busi- 
ness, is not a trader. In re Chapman, 9 Ben. 311, Fed. Gas. 
No. 2,601. One who superintends the running of a steamer, 
and, as treasurer of the corporation owning her, receives and 
disburses the money earned by the vessel, is not a merchant 
or tradesman within the act. In re Merritt, 7 Fed. 853. Nor is 
a teamster who, even to a very considerable extent, buys and 
sells hay and straw for the bona fide purpose of keeping his 
team from standing idle. In re Kimball, 7 Fed. 461. Nor 
is a theatrical manager who buys costumes, machinery, etc., 
for use in his business, and who on a few occasions has sold 
some such property. In re Duff, 4 Fed. 519. 

MtrcJinnU and Manufacturers. 

A merchant is one who buys to sell again, and who does 
both, not occasionally or incidentally, but habitually and as a 
business. Gom. v. Natural Gas Co., 32 Pittsb. Leg. J. 310. It 
has also been held that a banker is a merchant, according to 
both the commercial and the civil law. Brown v. Pike, 34 La. 
Ann. 578. But this point is not now of importance, since in- 
corporated banks, whether state or national, are expressly ex- 
cepted from the provisions of the present bankruptcy law. 
But a commercial traveler is not a merchant, since he does not 
sell his own goods. Ex parte Taylor, 58 Miss. 481. The 
proprietor of a steam saw-mill, in which are prepared boards 
and shingles from lumber grown on his own land, and placed 
BL. BANK.— 3 



34 BAKKRUPTS. (Ch. 3 

on the market for sale, is a manufacturcF within the meaning 
of the act, though perhaps not a trader. In re Chandler, 1 
Low. 478, Fed. Gas. No. 2,591. But a corporation engaged in 
the business of printing and publishing a weekly newspaper, 
is not a manufacturer. In re Capital Publishing Co., 3 Mac- 
Arthur, 405. Compare In re Kenyon, 6 N. B. R. 238. (Such 
a corporation, however, is made subject to the institution of 
proceedings in involuntary bankruptcy against it by the ex- 
press language of the present law, which applies to corpora- 
tions "engaged principally in printing and publishing.'") A 
builder or repairer of vessels is not a manufacturer. People 
V. Dry-Dock Co., 63 How. Prac. 453. Nor is a cooper who 
makes barrels from staves (New Orleans v. Le Blanc, 34 La. 
Ann. 597), nor an ice-cream confectioner. New Orleans v. 
Mannessier, 32 La. Ann. 1075. 

National and State Banlas. 

The present act, it will be perceived, expressly excepts 
national banks from the class of persons who may be ad- 
judged bankrupts. Former statutes on the subject con- 
tained no such exempting clause. Yet the courts always 
held that a national bank was not liable to be proceeded 
against in bankruptcy. The bankruptcy act, it- was said, 
did not repeal or supersede the provisions of the act in re- 
lation to the winding up of insolvent national banks and 
the appointment of receivers for them (Eev. St. U. S. §§ 
5120-5140). Nor could the two acts exist together as fur- 
nishing concurrent or co-ordinate remedies. The remedies 
prescribed in such a case under the bankruptcy act are 
not so ample and complete as those under the statute spe- 
•cially relating to national banks; and the fact that cred- 
itors cannot of their own motion institute proceedings un- 
.der the latter statute does not change the construction of 
the acts. Nor did congress intend to inject the provisions 
of the bankruptcy act into the other statute, so that cred- 
itors could apply the remedies of the one, and the con- 



§ 4) WHO MAY BECOME BANKRUPTS. .35 

ti'oller of the currency the remedies of the other. Such a 
construction would inevitably produce confusion and con- 
flicts of jurisdiction. In re Manufacturers' Nat. Bank, 5 
Biss. 499, Fed. Cas. No. 9,051. 

Under the act of 1867, it was held that a bank incorpo- 
rated under the laws of a state was subject to the operation 
of the national bankruptcy law. Thornhill t. Bank of 
Louisiana, 3 N. B. B. 110, Fed. Gas. No. 13,990. But it will 
be noted that this rule is changed by the present statute, 
which expressly provides that its involuntary features may 
apply to "private bankers," but shall not apply to "banks 
incorporated under state or territorial laws." 

jyecedenfs Estate. 

The banlcruptcy act does not authorize the institution of 
proceedings against the individual estate of a deceased per- 
son; nor does the court acquire jurisdiction of the indi- 
vidual estate of a decedent by proceedings against a iirm 
of which he was a member. Adams v. Terrell, 4 Woods, 
337, 4 Fed. 796. 

A.Ue?ia. 

The benefit of the bankruptcy act is not by its terms re- 
stricted to citizens of the United States. Consequently, 
an alien resident within this country and owing debts here 
may take advantage of the act by filing liis voluntary peti- 
tion in banlcruptcy. In re Boynton, 10 Fed. 277; In re 
Ooodfellow, 1 Low. 510, Fed. Cas. No. 5,536. 

Wage Earners. 

These persons, by the express terms of the act, are exempt 
from liability to be adjudged bankrupts. The word "wage 
earners"' is not. a technical term of the law, but has come 
to be much used of late years, especially by writers on po- 
litical and social economy, as a substitute for the phrase 
■^'laboring classes." It may be expected that difficulties 



36 BAKKRUPTS. (Ch. 8 

■will arise in its construction, in view of the complex condi- 
tions of modern business life and the manifold nature of 
the relation of employer and employed. The first section 
of the statute provides that the term "wage earner" shall 
mean "an individual who works for wages, salary, or hire, 
at a rate of compensation not exceeding one thousand five 
hundred dollars per year." But obviously the terms of 
this definition require explanation, and especially the words 
"wages" and "salary." According to Webster, the former 
expression means "hire, reward, that which is paid or stipu- 
lated for services, but chiefly for services by manual labor, 
or for military and naval services. We speak of serv- 
ants' wages, a laborer's wages, or soldiers' wages; but we 
never apply the word to the rewards given to men in office, 
which are called fees or salary." Another authority de- 
fines wages as "the agreed compensation for services ren- 
dered in a menial or subordinate capacity." Abbott, Law 
Diet.; TiJyan v. Hook, 34 Hun, 185. Bouvier defines the 
same tei'm as "a compensation given to a hired person for 
his or her services." Bouvier, Law Diet. In a recent 
work of high authority, "wages" is defined as "that which 
is paid for a service rendered; what is paid for labor; hire. 
In common use the word 'wages' is applied specifically to 
the payment made for manual labor or other labor of a 
menial or mechanical kind, distinguished (but somewhat 
vaguely) from 'salary,' and from 'fee', which denotes com- 
pensation paid to professional men, as lawyers and phy- 
sicians." And a wage earner is "one who receives stated 
wages for labor." Century Diet. s. v. "The word 'wages,' 
in its popular use, signifies the remuneration of hired labor. 
As so used, it is more or less disparaging, being commonly 
placed in contrast with the words 'salaries,' 'fees,' 'hono- 
rarium,' etc., by which it is sought to denote the remunera- 
tion of services of a higher or more intellectual character.'^ 
F. A. Walker, in Lalor's Polit. Cyclop. 



§ 4) WHO MAY BKCOME BANKRUPTS. 37 

In the case of Com. v. Butler, 99 Pa. St. 542, Chief Justice 
Sharswood observed: "The truth is, and this the lexi- 
cographers seem to hold, that if there is any difference in 
the popular sense between 'salary' and 'wages,' it is only 
in the application of them to more or less honorable serv- 
ices. A farmer pays his farm hand, in common speech, 
wages, whether by the day, the week, the harvest, or the 
year. If for any reason he has occasion to employ an over- 
seer, his compensation, no matter how measured, is called 
a 'salary.' An ironmaster pays his workmen wages; his 
manager receives a salary. A merchant pays wages to his 
servant who sweeps the floor, makes the fire, and runs his 
errands; but he compensates his salesman or clerk by a 
salary." See, also, South & North Alabama B. Co. v. Falk- 
ner, 49 Ala. 118; People v. Remington, 45 Hun, 338. In 
another case it is said : " 'Fees' are compensation for par- 
ticular acts or services, as the fees of clerks, sheriffs, law- 
yers, physicians, etc. 'Wages' are the compensation paid 
or to be paid for services by the day, week, etc., as of labor- 
er's, commissioners, etc. 'Salaries' are the per annum com- 
pensation to men in official and some other situations." 
Cowdin V. Huff, 10 Ind. 85. But according to another opin- 
ion, "this compensation to a laborer may be a specified sum 
for a given time of service, or a fixed sum for specified 
work; that is, payment may be made by the job. The 
word 'wages' does not imply that the compensation is to be 
determined solely upon the basis of time spent in service; 
it may be determined by the work done. It means com- 
pensation estimated in either way." Ford v. St. Louis, K. 
& K W. R. Co., 54 Iowa, 72S, 7 N. W. 126. 

A fixed annual compensation paid to the secretary of a 
business corporation is a salary; it is not wages. Gordon 
V. Jennings, 9 Q. B. Div. 45. Where the receiver of a rail- 
road corporation is directed by the order of the court to 
pay "wages of employes" out of the income of the road, 



38 BANKRUPTS. (Ch. 3 

this term does not include the services of counsel employed 
for special purposes. Louisville, E. & St. L. R. Co. v. Wil- 
son, 138 U. S. 505, 11 Sup. Ct. 405. So, in People v. Rem- 
ington, 45 Hun, 329, it is held that the term "wages" does 
not include the salary of the president, manager, or super- 
intendent of a business corporation; nor sums payable to 
attorneys at law for professional services rendered to the 
corporation upon occasional retainers; nor the compensa- 
tion of a person who is employed by the company to sell 
its goods in a foreign country, at a fixed annual salary, 
with the addition of a commission and his traveling ex- 
penses. Again, the term "wages" is not applicable to the 
compensation of the public officers of a municipal corpora- 
tion, who receive annual salaries, which are not due till 
the end of the year, and who are entitled to be paid so long 
as they hold their offices without regard to the services 
rendered. People v. Meyers, 25 Abb. New Cas. 368. A 
person who takes a contract to execute a certain cutting on 
a railway, at a certain sum per cubic yard, and employs 
several men under him to assist in doing the work, is not 
a "workman" or "laborer," although he does a portion of 
the work himself; and his compensation is not "wages." 
Riley v. Warden, 2 Exch. 59. So again, where manufac- 
turers receive raw material from another, and work it up 
for him into a finished or partly finished product, by the 
use of their machinerj' and the labor of their employes, un- 
der a contract specifying a fixed rate of payment, the money 
due them therefor is not "wages." Lang v. Simmons, 64 
Wis. 525, 25 N. W. 650; Campfield v. Lang, 25 Fed. 128. 
But on the other hand, in Texas, under a constitutional 
and statutory provision that "current wages for personal 
service" shall not be subject to garnishment, it has been 
held that the exemption might be claimed by one who was 
employed by a live-stock company as manager, at a monthly 
salary of |200, though he was also a stockholder of the 
company. Bell v. Indian Live-Stock Co., 11 S. W. 344.' 



§ 4) WHO MAY BECOME BANKRUPTS. 39 

If it were not for the definition contained in the act it- 
self, we should be justified in concluding, from these au- 
thorities, that "wage earner"' must be taken as synonymous 
with "laborer," as the latter term is ordinarily employed in 
statutes and in legal speech, or as denoting one who sub- 
sists by his physical labor, as distinguished from one who 
subsists by professional skill. Weymouth v. Sanborn, 43 
N. H. 173; Pennsylvania & D. E. Go. v. LeufEer, 84 Pa. St. 
168. But since the bankruptcy act makes the term "wage 
earner" include not only a person who works for "wages," 
but also one who works for "salary" or "hire," it will proba- 
bly be held to include almost all classes of employes, what- 
ever be the nature of their labor, who are compensated at 
a fixed rate, not exceeding $1500 per annum, but excluding 
independent contractors and all those persons whose re- 
muneration is given for specific services rendered upon an 
occasional employment, and not under a permanent engage- 
ment, and who are employed in such occupations as require 
something more than mere physical labor or mere clerical 
ability. 



40 BANKRUPTS. (Ch. 3 

PAETNEES, 

§ 5. a A partnership, during the continuation of 
the partnership business, or after its dissolution 
and before the final settlement thereof, may be ad- 
judged a bankrupt. 

b The creditors of the partnership shall appoint 
the trustee; in other respects so far as possible the 
estate shall be administered as herein provided for 
other estates. 

c The court of bankruptcy which has jurisdiction 
of one of the partners may have jurisdiction of all 
the partners and of the administration of the part- 
nership and individual property. 

d The trustee shall keep separate accounts of the 
partnership property and of the property belong- 
ing to the individual partners. 

e The expenses shall be paid from the partner- 
ship property and the individual property in such 
proportions as the court shall determine. 

/ The net proceeds of the partnership property 
shall be appropriated to the payment of the part- 
nership debts, and the net proceeds of the individ- 
ual estate of each partner to the payment of his 
individual debts. Should any surplus remain of 
the property of any partner after paying his indi- 
vidual debts, such surplus shall be added to the 
partnership assets and be applied to the payment 
of the partnership debts. Should any surplus of 
the partnership property remain after paying the 
partnership debts, such surplus shall be added to 
the assets of the individual partners in the propor- 
tion of their respective interests in the partner- 
ship. 



§ 5) f PARTNERS. 41 

g The cou^t may permit the proof of the claim of 
the partnership estate against the individual estates, 
and vice versa, and may marshal the assets of the 
partnership estate and individual estates so as to 
prevent preferences and secure the equitable dis- 
tribution of the property of the several estates. 

h In the event of one or more but not all of the 
members of a partnership being adjudged bank- 
rupt, the partnership property shall not be admin- 
istered in bankruptcy, unless by consent of the 
partner or partners not adjudged bankrupt; but 
such partner or partners not adjudged bankrupt 
shall settle the partnership business as expedi- 
tiously as its nature will permit, and account for the 
interest of the partner or partners adjudged bank- 
rupt. 

Jurisdiction in Partnership Cases. 

One or more partners may file their petition in banlcruptcy 
without making the others parties, but notice of the pendency 
of the proceedings must be given to the other partners. In 
re Moore, 5 Biss. 79, Fed. Cas. No. 9,750; In re Gorham, 9 
Biss. 23, Fed. Cas. No. 5,624. So where two partners of a 
firm of three have petitioned to have the firm adjudicated 
bankrupt, the district court has jurisdiction over the partner- 
ship property, notwithstanding the third partner is proceed- 
ing in a state court for a settlement of the partnership con- 
cerns, and has procured himself to be appointed receiver, and 
is in possession of the joint assets. In re Hathorn, 2 Woods, 
73, Fed. Cas. No. 6,214. But where one of two partners files 
a voluntary petition in bankruptcy, alleging that the other 
will not join him, and praying to have him declared a bank- 
rupt, this, as to the other partner, is a case of involuntary 
bankruptcy. Medsker v. Bonebrake, 108 U. S. OG, 2 Sup. 
Ct. 351, 



42 BANKKUPTS. (Ch. 3 

Involuntary BanJn-uptcy. 

A petition in bankruptcy against a firm, naming only two 
of the three partners, cannot be amended so as to make the 
third a party after all the testimony is taken and the cause is 
before the court upon hearing, and the firm cannot be ad- 
judged bankrupt upon a petition so defective. In re Pitt, 
8 Ben. 389, Fed. Cas. No. 11,188. And an adjudication in 
bankruptcy against a firm must be made in one proceeding 
and on one petition; the adjudication of one member of a 
firm in one proceeding; and of the remaining members of it 
in a separate proceeding, with such effect as to bring the 
firm into bankruptcy, is a thing not contemplated by the 
statute. In re Plumb, 9 Ben. 279, Fed. Cas. No. 11,231. But 
proceedings in one district against a firm constitute no bar to- 
similar proceedings in another district against another firm 
some of whose members were also members of the former 
firm. In re Jewett, 7 Biss. 473, Fed. Cas. No. 7,307. But 
in a case where a firm composed of three persons did business,, 
and they all resided within one district, and two of these part- 
ners constituted another firm, doing business under another 
name in a different district, and the former firm was adjudged 
bankrupt and a trustee appointed, who took possession of all 
the property of all three partners, and subsequently a similar 
petition was filed in the other district against the firm com- 
posed of the two partners; it was held that the said trustee 
had acquired all the interest of the partners in the second 
firm, which firm was ipso facto dissolved by the bankruptcy; 
that the creditors of the second firm would be entitled to be 
first paid out of the assets of that firm, and such right would 
be recognized in the bankruptcy proceedings already insti- 
tuted; and that the court to which the latter petition was 
presented would not proceed to an adjudication thereon 
while proceedings were pending in the other district. In re 
Leland, 5 Ben. 168, Fed. Cas. No. 8,228. 



§ 5) PARTNERS. 43i 

Dissolution of PartnersJiip. 

A dissolution of the firm by the act of all or any of the 
partners does not put an end to the power of the bankruptcy- 
court, so long as any unfinished business, debts, credits, or 
assets remain. In Ee Noonan, 3 Biss. 491, Fed. Cas. No. 
10,292; In re Crockett, 2 Ben. 514, Fed. Cas. No. 3,402; In Ee 
Stowers, 1 Low. 528, Fed. Cas. No. 13,516. 

Secret Partnei. 

It is not essential to the validity of an adjudication in 
bankruptcy against a partnership that a secret or dormant 
partner should have been made a party defendant; where 
only the ostensible partners are served and proceeded against, 
this will at least bind the partnership property. Metcalf v. 
Officer, 5 Dill. 565, Fed. Cas. No. 9,490. 

Presumptive Partner. 

One who permits himself to be held out as a partner, 
though he has actually retired from the firm, may be made 
bankrupt as a member of the firm at the suit of creditors. 
In re Krueger, 2 Low. 66, Fed. Cas. No. 7,941. 

Dissolution T)y Death of Partner. 

A partnership dissolved by the death of one of the mem- 
bers cannot be treated as still subsisting so as to be subject 
to the provisions of the bankrupt law. The status of a de- 
ceased person cannot be passed upon by a bankruptcy court, 
nor has he any property the title to which can vest in a 
trustee appointed in a proceeding by or against the surviving 
partner. In Ee Temple, 4 Sawy. 92, Fed. Cas. No. 13,825, 
Nevertheless a surviving partner may be adjudged bankrupt 
on an act of bankruptcy committed by him in respect to the 
joint property and in the course of the administration of the 
assets of the dissolved partnership. In Ee Stevens, 1 Sawy. 
397, Fed. Cas. No. 13,393. And where a surviving partner 



44 BANKRUPTS. (Ch. 3 

flies his petition in bankruptcy, both individually and as sur- 
Tiving partner of a firm, the court has authority to adjudge 
him bankrupt in both characters. Briswalter v. Long, 7 
Sawy. 74, 14 Fed. 153. 

Acts of Bankruptcy hy ■ Partners. 

A sale by one partner to his co-partner, when the firm is 
insolvent and on the eve of bankruptcy, is presumptively 
fraudulent as to firm creditors, the effect of such transfer 
being to change the order of payment and prefer private 
creditors to firm creditors, and the court should set it aside 
and distribute the property as firm property. In Re Cook, 
3 Biss. 122, Fed. Cas. No. 3,150. But it is not an act of 
bankruptcy on the part of one member of a firm to influence 
or procure the departure of another from the state, though 
the circumstances are such that the absconding partner 
makes himself amenable to the law. In re Terry, 5 Biss. 
110, Fed. Gas. No. 13,836. 

Effect of Adjudication of one Partner. 

An adjudication of bankruptcy against one member of a 
partnership dissolves the firm, and makes the solvent partner 
and the trustee of the bankrupt tenants in common of the 
partnership effects. Halsey v. Norton, 45 Miss. 703 ; Black- 
well v. Clay well, 75 N. C. 213; McNutt v. King, 59 Ala. 597. 

Pistrihution of the Estate. 

Partnership property must first go to satisfy partnership 
debts in preference to separate debts due by a partner. In 
re Wiley, 4 Biss. 214, Fed. Cas. No. 17,656. But the rule 
is now well settled, in accordance with the English doctrine, 
that where there are both partnership and individual debts, 
but no partnership assets and no solvent partner, the debts 
■of the firm and of the members can both be proved and the 
general estate is to be distributed pari passu among all the 



§ 5) PARTNERS. 4&- 

creditors joint and several. In re Knight, 2 Biss. 518, Fed. 
Cas. No. 7,880; In re Litchfield, 5 Fed. 47; In re Blumer, 
12 Fed. 489; In re Lloyd, 22 Fed. 88. The firm creditors, 
have a right to share pari passu with individual creditors in 
the individual estate where the firm assets are not more than 
sufQcient to pay the costs and expenses properly chargeable 
to the firm estate. In re Litchfield, 5 Fed. 47. The test 
of available assets for such purpose is whether, at the time 
of the filing of the petition in bankruptcy, there was an 
available fund to pay firm creditors; and a neglect by the 
firm creditors to avail themselves of such fund then existing, 
whereby it has been dissipated or lost to them, does not en- 
large their equity against the individual estate, although in 
fact they have been paid nothing on their debts. Id. But 
when all the partners are in bankruptcy, it was the general 
rule that the separate estate of one partner should not claim 
against the joint estate of the partnership in competition 
with the joint creditors, nor the joint estate against the sep- 
arate estate in competition with the separate creditors. In 
re Lloyd, 22 Fed. 90. But the present statute expressly pro- 
vides that the court "may permit" this to be done. Where 
a firm composed of three persons gave, in settlement of part 
of a debt due to one creditor, the note of the firm with the 
indorsement of one of the partners, and for other parts of it, 
severally, three notes, each made by one of the partners and 
indorsed by the others, and the firm was adjudged bankrupt, 
and the creditor proved his debt against the makers alone 
of the four notes, it was held that he was entitled to dividends 
according to such proofs, out of the several estates, joint or 
separate, against which the proofs were made. Mead v. 
National Bank of Fayetteville, 6 Blatchf. 180, Fed. Cas. No. 
.9,366. And see In re Bradley, 2 Biss. 515, Fed. Cas. No.. 
1,772. Where three of the four members of a firm, and the 
firm itself, settled with creditors under a composition in a, 
bankruptcy proceeding to which the fourth member, A., was. 



46 BANKRUPTS. (Ch. 3 

not a party, and afterwards, in another proceeding, A. was 
adjudged a banlirupt, it was held that the firm creditors were 
not entitled to share with A.'s individual creditors in the 
distribution of the fund realized from A.'s individual estate, 
except the holders of certain notes made by the firm on which 
A. was liable as an indorser. In re Adams, 29 Fed. 84.3. 
A debt founded on a judgment against the two members of 
a firm jointly, in a suit on a partnership note, does not entitle 
the creditors to dividends out of the separate estate of each 
member of the firm, on an equal footing with the separate 
creditors of each member. In Ee Berrian, 6 Ben. 297, Fed. 
Cas. No. 1,351. And where two partners signed an agree- 
ment, as individuals, to transfer certain property as security 
for a partnership liability, but failed to make the transfer, 
and subsequently became bankrupt, it was held that such 
liability was not provable against the separate estate of one 
■of the partners. Gauss v. Schrader, 10 Biss. 289, 48 Fed. 
816. And again, a claim founded on a bond signed by the 
individual members of a firm, but not given for a firm debt, is 
not entitled, as against partnership creditors, to be paid out 
of the assets of the firm; it is a joint but not a partnership 
debt. In re Eoddin, 6 Biss. .377, Fed. Cas. No. 11,989. An 
agreement between two traders to unite their stocks in trade 
as the capital of a partnership to be formed between them, 
and to convert the separate business debts of either into joint 
debts of the firm will not entitle a separate creditor who has 
not acceded in any way to the arrangement before bank- 
ruptcy, to prove his claim as a joint creditor of the firm 
against the partnership estate. In re Isaacs, 3 Sawy. 35, 
Fed. Cas. No. 7,093. A joint creditor, in case of the separate 
bankruptcy of one member of the firm, has a right to prove 
his joint debt, and vote for the trustee, in the separate bank- 
ruptcy. In re Webb, 4 Sawy. 32G, Fed. Cas. No. 17,317. It 
is also held that the exemption provided for by the statute 
is not to be allowed to the individual partners out of the firm 



§ 5) PARTNERS. 47 

assets. In re Croft, 8 Biss. 188, Fed. Gas. No. 3,404; In re 
Hughes, 8 Biss. 107, Fed. Gas. No. 6,842. 

Discharge of ParPners. 

The discharge of a member of a firm, upon his individual 
petition in bankruptcy, and without any proceedings by or 
against the firm, does not discharge such member from the 
firm or partnership debts. Hudgins v. Lane, 3 Hughes, 361, 
Fed. Gas. No. 6,827; In re Little, 1 N. B. R. 341, Fed. Gas. No. 
8,390; In re Noonan, 10 N. B. R. 330, Fed. Gas. No. 10,292. 
And a discharge in bankruptcy of two general partners can- 
not be set up in favor of a special partner, in an action 
against the three as general partners on the ground that the 
special partner has made himself liable as a general 'partner. 
Abendroth v. Van Dolsen, 131 U. S. 66, 9 Sup. Gt. 619. 
Where a firm is proceeded against as such,, unless the court 
acquires jurisdiction of all the partners it cannot grant a 
discharge to any. In re Beals, 9 Ben. 223, Fed. Gas. No. 
1,165. A proceeding in bankruptcy by a partner against 
lis copartner is not an involuntary proceeding as respects the 
copartner, and therefore the latter cannot obtain his dis- 
charge without the assent of creditors or the amount of as- 
sets required in voluntary proceedings by the act of July 27, 
1868. In re Wilson, 2 Low. 453, Fed. Gas. No. 17,784. But, 
as to such a proceeding being voluntary, compare Medsker v. 
Bonebrake, 108 U. S. 66, 2 Sup. Gt. 351. When objections 
are filed to the discharge of partners who are bankrupts, 
the trial may be joint, but the verdicts and decrees must be 
several. In re George, 1 Low. 409, Fed. Gas. No. 5,325. 



48 BAN'KEDPTS. (Ch. 3 



EXEMPTIONS or BANKRUPTS. 

§ 6. ft This act shall not affect the allowance to 
bankrupts of the exemptions \iehich are prescribed 
by the state la-ws in force at the time of the filing 
of the petition in the state -wherein they have had 
their domicile for the six months or the greater 
portion thereof immediately preceding the filing of 
the petition. 

ExemptioTis. 

It is provided by section 47 of the present act that the trustee 
shall set apart the bankrupt's exemptions and report the items 
and estimated value thereof to the court. But the right of 
the bankrupt to the property exempted by the law of the state 
is a fixed and determinate right, not dependent upon the dis- 
cretion of the trustee, and where it is claimed and illegally re- 
fused before the trustee sells the property, it may be asserted 
against the proceeds of the same while in the hands of the court 
for distribution. In re Jones, 2 Dill. 343, Fed. Cas. No. 7,445. 
It is further provided, by section 7 of the present act, that it 
shall be the duty of the bankrupt to make a claim for such ex- 
emptions as he may be entitled to. And section second con- 
fers upon the bankruptcy court jurisdiction to "determine all 
claims of bankrupts to their exemptions." 

Title to Exempt Property. 

Property exempt by the law of the state does not pass to the 
trustee in bankruptcy at all; he acquires no title to it, and the 
title of the owner is not impaired or affected by the proceedings 
in bankruptcy. In re Hunt, 5 N. B. R. 493, Fed. Cas. No. 
0,883; In re Hester, 5 N. B. R. 285, Fed. Cas. No. 6,437; Bush 
V. Lester, 15 N. B. R. 36; Wilkinson v. Wait, 44 Vt. 508; 
Felker v. Crane, 70 Ga. 484. Hence it remains the absolute 
property of the bankrupt and subject to any specific liens on it 



§ 6) EXEMPTIONS OF BANKRUPTS. 49 

created by his voluntary act or by legal proceedings. Robin- 
son V. Wilson, 15 Kan. 595. But a trustee in bankruptcy, 
like a sheriff levying execution, is entitled to at least temporary 
control of the exempted property until it can be set apart from 
the rest. Sheldon v. Bounds, 40 Mich. 425. As the title to 
such property does not pass to the trustee, the owner may 
bring and maintain suits in respect to the same without regard 
to the pendency of his bankruptcy proceedings. Henly v. 
Lanier, 75 N. C. 172. He may maintain an action for the re- 
covery of it in specie, or for damages for wrongs done in respect 
to it, independently of the trustee. Winn v. Morse, 59 N. H. 
210. The right of action for trespass to exempt property is not 
in the trustee but in the bankrupt himself. Selling v. Gunder- 
man, 35 Tex. 545. The trustee is not entitled to any of the ex- 
empted property, and it is no concern of his who may have the 
right to it; upon the death of the bankrupt, the title to such 
property vests in the executor or administrator. In re Hester,, 
5 N. B. R. 285, Fed. Cas. No. 6,437. When exempted property 
is designated and set apart to the bankrupt, under the orders 
of the bankruptcy court, as such property does not pass to the 
trustee, and does not further concern the court nor the estate, 
the court has no jurisdiction to defend such property from ad- 
verse liens that may or may not be extinguished by the bank- 
ruptcy. Jeffries v. Bartlett, 20 Fed. 496. A sale made after 
the filing of the petition in bankruptcy, of property exempt 
both by the bankrupt act and the state law, under a levy made 
prior to the commencement of the proceedings in bankruptcy, 
will be set aside. In re Griffin, 2 N. B. E. 254, Fed. Cas. No, 
5,813. Land which has been set aside as exempt, and for a 
homestead, in bankruptcy proceedings, to which no exception 
has been made by any of the creditors, is the absolute property 
of the bankrupt and his alienees and those claiming under 
them, as against a party claiming the property under an execu- 
tion sale upon a judgment recovered by certain fiduciary cred- 
itors of the bankrupt subsequent to the allotment of the home- 
stead. Simpson v. Houston, 97 N. 0. 344, 2 S. E. 651, Where 
BL. BANK.-4 



50 BANKRUPTS. (Ch. 3 

land has been set apart to a bankrupt as an exemption by the 
bankruptcy court, this has the same effect in holding off prior 
liens of creditors, or liens existing at the time of the adjudica- 
tion, as if the exemption had been regularly set apart by a pro- 
ceeding in the state court having jurisdiction, in the method 
prescribed by the state laws. Barrett v. Durham, 80 Ga. 336, 
5 S. E. 102; Collier v. Simpson, 74 Ga. 697. 

Who may clahn K.ei-iripiion. 

A wife cannot have a homestead on the land of her bankrupt 
husband, as against the trustee, or against those claiming title 
to the san)e under a sale made by the trustee. Lumpkin v. 
Eason, 44 Ga. 339. The individual members of a bankrupt 
partnership are not entitled to exemptions out of the partner- 
ship property. Their interest, as individuals, in the joint prop- 
erty, is an interest in the surplus only. In re Corbett, 5 Sawy. 
2(;(;, Fed. Gas. No. 8,220; In re Hafer, 1 N. B. R. 147, Fed. ( 'as. 
No. •5,896; In re Price, 6 N. B. R. 400, Fed. Cas. No. 11,410; 
In w Handlin, 12 N. B. R. 49, Fed. (;as. No. 6,018 ; In re Tonne, 
13 X. B. R. 170, Fed. Tas. No. 14,095; In re Sauthoff, K! N. B. 
R. 181, Fed. Cas. No. 12,380; Wright v. Pratt, 31 Wis. !l:); 
Pond V. Kimball, 101 Mass. 105; Guptil v. McFee, 9 Kan. :i.-): 
Kiugsley v. Kingsley, 39 Cal. 605. See, per contra. In re 
Yoiiiig, 3 N. B. R. Ill, Fed. Cas. No. 18,148; In re Richardson, 
11 N. B. R. 114, Fed. Cas. No. 11,776; Stewart v. Brown, 37 
N. Y. 350. 

Z/<'//-v (in E.rviiipf Pi'oppvty. 

Property cannot be exempted to the prejudice of a creditor 
>who holds a valid Vendor's lien thereon. The lien must pre- 
vail. Congress did not intend that the bankrupt act should 
override cases of that nature. In re Perdue, 2 N. B. R. 183, 
FLd. Cas. No. 10,975; In re Whitehead, 2 X. B. R. 599, Fed. 
Ca.s. No. 17,562; In re Brown, 3 N. B. R. 250, Fed. (^is. No. 
1,980. Since a discharge in bankruptcy does not divest the 
lien which a creditor may have on the property of the bankrupt. 



§ (i) EXEMPTIONS OF BANKKUPJS.' 51 

set apart to him as an exemption and unadministered by tlie 
bankruptcy court, therefore his discharge v/ill not prevent the 
re-issue of an execution on a judgment antedating the dis- 
charge, which judgment was a lien on property that had been 
set apart in the banlviuptcy proceedings as a homestead. 
Fowler v. Wood, 20 S. C. 109, 1 S. E. 597. The debtor may 
lawfully mortgage or convey his exempt property, and such a 
preference is not in violation of the act nor a fraud upon it. 
Schlitz v. Schatz, 2 Biss. 248, Fed. Cas. No. 12,459. Since the 
title to the bankrupt's homestead does not pass to the trustee, 
the latter cannot maintain a bill to set aside a prior mortgage 
on the homestead, otherwise valid, as giving a preference con- 
trary to the act, nor to restrain the foreclosure of such mort- 
gage in the state ccurts. Rix v. Capitol Bank, 2 Dill. 307, 
Fed. Cas. No. ll,S(i9. A general creditor of an insolvent can- 
not subject a homestead to liability for his debts, notwithstand- 
ing the insolvent had applied property in his hands to the pay- 
ment of a debt which \\as a lien on the homestead. In re 
Henkel, 2 Sawy. 305, Fed. Cas. No. 0,302. 

Forfeiture or Waiver of Exemption. 

The bankrupt cannot claim any exemption in property con- 
veyed by him prior to the commencement of the proceedings in 
bankruptcy in fraud of his creditors, and afterwards recovered 
to the estate. The sale is good as against him, and in at- 
tempting to place his property beyond the reach of his credit- 
ors, he has placed his exemption beyond his own reach. In re 
Graham, 2 Biss. 449, Fed. Cas. No. 5,000; Keating v. Keefer, 
6 N. B. R. 133, Fed. Cas. No. 7,035. But compare Bartholo- 
mew v. West, 2 Dill. 290, Fed. Cas. No. 1,071; JIcFarland v. 
Goodman, 6 Biss. Ill, Fed. Cas. No. 8,7S!). A bankrupt who 
is a fugitive from justice, and who has failed to account to the 
assignee for |5,000 and other property in his hands, has no 
right, after ten years aci]uiescence, to claim an exemption out 
of cash in the hands of the assignee, the proceeds of property 
sold by him. In re Moyer, 15 Fed. 598. A purchase of a 



62 BANKRUPTS. (Ch. 3 

homestead by an insolvent trader upon the eve of bankruptcy, 
with knowledge of his insolvent condition and for the purpose 
of placing the property beyond the reach of process, is a legal 
fraud, and the court will declare it void as to creditors. In re 
, Boothroyd, 14 N. B. E. 230, Fed. Gas. No. 1,652. Where a 
bankrupt built a block for business purposes upon ground 
where his dwelling stood, and moved his family into it, he can- 
not, upon becoming insolvent, claim it as exempt under the 
state laws. In re Lammer, 14 N. B. R. 460, Fed. Gas. No. 
8,031. But a bankrupt is not deprived of his right to a home- 
stead exemption by the fact that he had previously waived his 
homestead rights in favor of a particular creditor; for such 
waiver only applies to persons claiming under the instrument 
in which the waiver was made, and does not inure to the benefit 
of the trustee in bankruptcy or the other creditors. In re 
Poleman, 5 Biss. 526, Fed. Gas. No. 11,247. 

By wJuit Law Governed. 

In setting out the exemption to the bankrupt, it is the lex 
domicilii which governs; and property which is exempt by the 
laws of the state where the debtor resides and where the peti- 
tion in bankruptcy is filed will be protected wherever it may 
be actually situated; and if it is situated In another state, the 
court will not inquire into the laws of that state to see if it 
would be exempt there, for that question is entirely immaterial. 
In re Stevens, 2 Biss. 373, Fed. Gas. No. 13,392. In constru- 
ing the state exemption laws, for the purposes of the bankrupt 
act, the federal courts will follow the decisions of the highest 
courts of the state. In re WyUie, 2 Hughes, 449, Fed. Gas. 
No. 18,112. See, also, Holland v. Withers, 76 Ga. 667. 



§ 7) DUTIES OF BANKRUPTS. 53 



DUTIES or BANKRUPTS. 

§ 7. a The bankrupt shall (1) attend the first 
meeting of his creditors, if directed by the court or 
a judge thereof to do so, and the hearing upon his 
application for a discharge, if filed; (2) comply with 
all lawful orders of the court; (3) examine the cor- 
rectness of all proofs of claims filed against his es- 
tate; (4) execute and deliver such papers as shall 
be ordered by the court; (5) execute to his trustee 
transfers of all his property in foreign countries; 
(6) immediately inform his trustee of any attempt, 
by his creditors or other persons, to evade the pro- 
visions of this act, coming to his know^ledge; (7) in 
case of any person having to his know^ledge proved 
a false claim against his estate, disclose that fact 
immediately to his trustee; (8) prepare, make oath 
to, and file in court within ten days, unless further 
time is granted, after the adjudication, if an invol- 
untary bankrupt, and w^ith the petition if a volun- 
tary bankrupt, a schedule of his property, showing 
the amount and kind of property, the location 
thereof, its money value in detail, and a list of his 
creditors, showing their residences, if known, if 
unknown, that fact to be stated, the amounts due 
each of them, the consideration thereof, the secu- 
rity held by them, if any, and a claim for such ex- 
emptions as he may be entitled to, all in triplicate, 
one copy of each for the clerk, one for the referee, 
and one for the trustee; and (9) w^hen present at 
the first meeting of his creditors, and at such other 
times as the court shall order, submit to an exam- 
ination concerning the conducting of his business, 



54 BANKKUPXS. C^^h. 3 

the cause of his bankruptcy, his dealings with his 
creditors and other persons, the amount, kind, and 
whereabouts of his property, and, in addition, all 
matters w^hich may affect the administration and 
settlement of his estate; but no testimony given by 
him shall be offered in evidence against him in 
any criminal proceeding. 

Provided, however, that he shall not be required to 
attend a m.eeting of his creditors, or at or for an 
examination at a place more than one hundred and 
fifty miles distant from his home or principal place 
of business, or to examine claims except w^hen pre- 
sented to him, unless ordered by the court, or a 
judge thereof, for cause shown, and the bankrupt 
shall be paid his actual expenses from the estate 
w^hen examined or required to attend at any place 
other than the city, town, or village of his resi- 
dence. 

Requisites of Sc/iedule. 

Partnership property, as well as individual assets, should 
be included in the schedules of a bankrupt. But an interest 
in an action of tort need not be included. In re Brick, i Fed. 
804. The omitting to name a creditor in the schedule is not 
fraudulent, if done with such creditor's assent. In re Need- 
ham, 2 N. B. B. 387, Fed. Cas. No. 10,081. Where a petition 
<in voluntary bankruptcy stated the present residences of cer- 
tain creditors to be unknown, but gave their former resi- 
dences, it was held that the statement as to the present resi- 
dences was sufficient, and the statement as to former resi- 
dences was surplusage, but the bankrupt should show, either 
in the schedules or by separate affidavit, what efforts he had 
made to ascertain the residences of such creditors. In re Pul- 
ver, 1 Ben. 381, Fed. Cas. No. 11,46G. Debts barred by the 



§ 7) DUTIES OF BANKRUPTS. 55 

statute of limitations should be placed in the schedule (In re 
Perry, 1 N. B. R. 220, Fed. Cas. No. 10,998) though it seems 
that this AN ill not have the effect to revive a debt so barred. 
In re Ray, 1 N. B. K. 203, Fed. Cas. No. 11,589. There is 
nothing in the bankrupt act which requires that a voluntary 
petition should be signed or verified by the debtor in person, 
in order to give the court jurisdiction of the proceeding. 
Wald V. WeM, 18 Blatclif. 495, G Fed. 163. It is held that ■ 
material additions to the schedule are not allowable, after the 
first meeting of creditors, except upon such conditions as will 
prevent injustice. In re Ratcliffe, 1 N. B. R. 400, Fed. Cas. 
Ko. 11,578. But an application by a bankrupt for leave to 
amend his schedule of creditors for the purpose of inserting 
the name of a creditor inadvertently omitted, is grantable of 
course, and is properly an ex parte proceeding, requiring no 
notice to creditors. To such an amendment creditors have 
no right to object. In re Hill, 5 Fed. 448. Where there is 
no reason to withhold a discharge on the ground of fraud 
against the bankrupt laws, the court wUl order formal amend- 
ments made to the schedules which were omitted by the bank- 
rupt through Ignorance and mistake, and the case continued, 
in order that such proper returns may be made; and, upon 
compliance with the orders of the court, an application for 
discharge may be made at some future time. In re Town- 
send, 2 Fed. 559. 

Practice in Regard to Meetings. 

The debtor is not required to be present at a meeting of 
the creditors called to consider a resolution to vary a compo- 
sition which has been accepted; and the absence of the 
debtor (unless it be shown that information was required of 
him, or that a creditor would be injuriously affected) is no 
ground for refusing to confirm the proceedings of such meet- 
ing. In re Dumahaut, 15 Blatchf. 20, Fed. Cas. No. 4,124. 
If it is clearly shown that the object of the meeting failed, 



56 BANKRUPTS. (Ch. 3 

by reason of the mistakes or mis-instructions of attorneys 
for the creditors, the court may direct a second meeting to be 
held. In re McDoweU, 6 Biss. 193, Fed. Gas. No. 8,776. 

Examination of BamJcrupt. 

Where a banlvrupt is summoned to an examination at the 
instance of a creditor who has proved his claim, counsel for 
other creditors have no right to interpose any objections to 
his examination. In re Winship, 7 Ben. 194, Fed. Gas. No. 
17,878. The bankrupt is to be examined and cross-examined 
like any other witness. In re Levy, 1 Ben. 496, Fed. Cas. No. 
8,296. "A bankrupt under examination has the right to be 
cross-examined, or further examined, in his own behalf, after 
the creditor or assignee is done with him, so far as may be 
necessary to explain or qualify any matters brought out on 
the direct examination, which may seem to bear unfavorably 
upon his conduct or dealings, or which are obscure." In re 
Noyes, 2 Low. 352, Fed. Cas. No. 10,370. But he has no 
right to consult with his attorney before answering a ques- 
tion, unless the examining magistrate shall see good cause 
for allowing it; but the attorney may attend and object to 
improper questions. In re Tanner, 1 Low. 215, Fed. Cas. Xo. 
13,745. He cannot refuse to answer a question as to his hav- 
ing lost money at gaming, on the ground that it will crim- 
inate or degrade him. In re Richards, 4 Ben. 303, Fed. Cas. 
No. 11,769. When the referee directs the bankrupt to pro- 
duce certain books and papers, which order the bankrupt dis- 
obeys, he is guilty of a contempt and may be imprisoned. In 
re Allen, 13 Blatchf. 271, Fed. Cas. No. 208. A bankrupt 
who has fully submitted to an examination, has a right to 
be protected against unreasonable demands for further exam- 
ination; and where the examination already bad is appar- 
ently full, unless it be made to appear that such examination 
was collusive, or deficient in some material and specified par- 
ticulars, an application for further examination may properly 



§ 8) DEATH OR INSANITY OF BANKRUPTS. 57 

be refused. In re Frisbie, 13 N. B. E. 349, Fed. Cas. No. 5,131. 
The summary jurisdiction of the bankruptcy court over the 
person of the bankrupt ceases upon his discharge; after that 
he cannot be required by summary order to submit to an ex- 
amination in reference to property alleged to have been con- 
cealed; a plenary suit is necessary for the recovery of such 
property. In re Dole, 11 Blatchf. 499, Fed. Cas. No. 3,964. 
See In re Solis, 4 Ben. 143, Fed. Cas. No. 13,165. If it ap- 
pears to the court that the bankrupt has neglected or refused 
to surrender any property which ought to come into the cus- 
tody of the trustee, or fails or refuses to give a satisfactory 
account of his property or his dealings previous to bankruptcy, 
the court may order him to surrender such property, or prop- 
erly account for it, and on his failure to do so, he may be com- 
mitted for contempt. In re Salkey, 6 Biss. 269, Fed. Cas. No. 
12,253. 

DEATH OR INSANITY OF BANKRUPTS. 

§ 8. a The death or insanity of a bankrupt shall 
not abate the proceedings, but the same shall be 
conducted and concluded in the same manner, so 
far as possible, as though he had not died or be- 
come insane: Provided, that in case of death the wid- 
ow and children shall be entitled to all rights of 
dower and allowance fixed by the laws of the state 
of the bankrupt's residence 



68 BANKRUPTS. (Ch. S 

PROTECTION AND DETENTION OF BANKRUPTS. 

§ 9. rt A bankrupt shall be exempt from arrest 
upon civil process except in the following cases: 
(1) When issued from a court of bankruptcy for 
contempt or disobedience of its la-wrful orders; (2) 
when issued from a state court having jurisdiction, 
and served within such state, upon a debt or claim 
from which his discharge in bankruptcy w^ould not 
be a release, and in such case he shall be ■ exempt 
from such arrest w^hen in attendance upon a court 
of bankruptcy or engaged in the performance of a 
duty imposed by this act. 

b The judge may, at any time after the filing of 
a petition by or against a person, and before the 
expiration of one month after the qualification of 
the trustee, upon satisfactory proof by the affida- 
vits of at least two persons that such bankrupt is 
about to leave the district in w^hich he resides or 
has his principal place of business to avoid examina- 
tion, and that his departure w^ill defeat the proceed- 
ings in bankruptcy, issue a warrant to the marshal, 
directing him to bring such bankrupt forthwith be- 
fore the court for examination. If upon hearing 
the evidence of the parties it shall appear to the 
court or a judge thereof that the allegations are 
true and that it is necessary, he shall order such 
marshal to keep such bankrupt in custody not ex- 
ceeding ten days, but not imprison him, until he 
shall be examined and released or give bail condi- 
tioned for his appearance for examination, from 
time to time, not exceeding in all ten days, as re- 
quired by the court, and for his obedience to all 
lawful orders made in reference thereto. 



§ 9) PROTECTION AND DETENTION OF BANKRUPTS. 50 

Privilege from, Arrest. 

This section does not relieve from arrest one who is already 
in custody at the time his petition in bankruptcy is filed. In 
re Walker, 1 Low. 222, Fed. Cas. No. 17,000; Hazleton v. Val- 
entine, 1 Low. 270, Fed. Cas. No. 6,287. Where the bankrupt 
is under arrest under process from a state court, he should 
make application to that court to obtain his release, before 
coming into the bankruptcy court, as this practice is less 
likely to produce conflict of jurisdiction. In re O'Mara, 4 
Biss. 506, Fed. Cas. Xo. 10,509. Where a debtor has been ar- 
rested on execution from a state court, and has claimed the 
benefit of the state law for the relief of poor debtors, before 
proceedings in bankruptcy, the court will not enjoin the cred- 
itor from proceeding under his execution. Minon v. Van Nos- 
trand, 1 Holmes, 251, Fed. Cas. No. 9,641. If the debtor is held 
under arrest in a civil action in a state court founded on a 
debt contracted by his defalcation while acting in a fiduciary 
capacity, that is a claim from which his discharge in bank- 
ruptcy would not release him, and therefore he is not entitled 
to be released on habeas corpus from the bankruptcy court. 
In re Seymour, 1 Ben. 348, Fed. Cas. No. 12,084; In re White- 
house, 1 Low. 429, Fed. Cas. No. 17,564. But in a case where, 
before adjudication, the creditor had obtained judgment for a 
tort, and after the institution of bankruptcy proceedings sued 
out a ca. sa. and had the debtor arrested, the bankruptcy 
court released him from arrest, notwithstanding that the 
state court had already refused to do so. The jurisdiction of 
the district court, as it was held, is exclusive and its author- 
ity paramount, and it will protect the bankrupt in the man- 
ner contemplated by law. In re Wiggers, 2 Biss. 71, Fed. Cas. 
No. 17,623. As to the power of the bankruptcy court, on a 
writ of habeas corpus, to inquire into the question whether 
the debt for which the arrest is made is one from which the 
bankrupt's discharge would release him, see In re Valk, 3 
Ben. 431, Fed. Cas. No. 16,814. ' 



■60 BANKRUPTS. (Ch. 3 

Arrest of Bankrupt. 

The arrest of the debtor under the provisions of this section 
is not intended as a means of security or satisfaction of the 
moving creditor's demand. It is designed merely to secure 
the attendance of the bankrupt from time to time, as the 
court shall order, and hence it is to that purpose only that 
bail is required of him. In re Sheehan, 8 N. B. R. 345, Fed. 
Cas. No. 12,737. The warrant may issue against the person 
a,nd property of the bankrupt, or either of them. In re Mul- 
ler, Deady, 519, Fed. Cas. No. 9,912. 

EXTRADITION OF BANKRUPTS. 

§ 10. a Whenever a ■warrant for the apprehen- 
sion of a bankrupt shall have been issued, and he 
shall have been found -within the jurisdiction of a 
court other than the one issuing the -warrant, he 
may be extradited in the same manner in -which 
persons under indictment are no-w extradited from 
one district -within -which a district court has juris- 
diction to another. 

Extradition. 

It is provided by Eev. St. U. S. § 1029, that "only one verit 
or warrant is necessary to remove a prisoner from one dis- 
trict to another. One copy thereof may be delivered to the 
sheriff or jailer from whose custody the prisoner is taken, 
and another to the sheriff or jailer to whose custody he is 
committed, and the original writ, with the marshal's return 
thereon, shall be returned to the clerk of the district to which 
he is removed." The preliminary examination of an alleged 
offender, arrested in another district, must be according to the 
usages of law in the state where the arrest is made. U. S. 
V. Brawner, 7 Fed. 86. 



§ 11) SUITS BY AND AGAINST BANKBUPTS. 61 

SUITS BY AND AGAINST BANKRUPTS. 

§ 11. a A suit -wrhich is founded upon a claim 
from -which a discharge would be a release, and 
■which is pending against a person at the time of 
the filing of a petition against him, shall be stayed 
until after an adjudication or the dismissal of the 
petition; if such person is adjudged a bankrupt, 
such action may be further stayed until t-welve 
months after the date of such adjudication, or, if 
■within that time such person applies for a dis- 
charge, then until the question of such discharge 
is determined. 

b The court may order the trustee to enter his 
appearance and defend any pending suit against 
the bankrupt. 

c A trustee may, ■with the approval of the court,, 
be permitted to prosecute as trustee any suit com- 
menced by the bankrupt prior to the adjudication, 
■with like force and effect as though it had been 
commenced by him. 

d Suits shall not be brought by or against a trus- 
tee of a bankrupt estate subsequent to t^wo years 
after the estate has been closed. 

Stay of Proceedings in State Courts. 

The power of the bankruptcy court to prohibit any pro- 
ceeding in a state court by a creditor to enforce a lien upon 
the bankrupt's property is to fee exercised summarily, and 
does not require a formal suit. In re Clark, 9 Blatchf. 372, 
Fed. Gas. No. 2,801. This power of the district court to stay 
proceedings extends not only to the state courts, but also to 
the admiralty side of the same court, and a libel against the 
bankrupt's vessel, filed under such circumstances, will be- 



<52 BANKRUPTS. (Ch. 3 

■enjoined. In re People's Mail S. S. Co., 3 Ben. 226, Fed. Cas. 
No. 10,970. But the power is not vested in any other dis- 
trict court than that in which the bankruptcy proceedings 
are pending. In re Eichardson, 2 Ben. 517, Fed. Cas. No. 
11,774. And the mere adjudication of bankruptcy will not 
•compel a stay of proceedings in the state court, without a 
restraining order from the bankruptcy court. Howes v. 
Holmes, 2 Mo. App. 81. ^^'here, after verdict and before 
judgment, in a cause pending in a state court, the defendant 
files his petition in bankruptcy, the court in which the prior 
action is pending, on the filing of a certificate of his haviijg 
been adjudged a bankrupt, on motion of the defendant, 
;should stay further proceedings until the bankruptcy court 
passes upon his discharge, and on the discharge being shown, 
render judgment on the verdict against the defendant, with a 
perpetual staj' of execution. Hill v. Harding, 116 111. 92, 4 
N. E. 361. Where, in an action upon a judgment of a court 
of another state, it appeared that the judgment was obtained 
intermediate the commencement by the defendant of volun- 
tary proceedings in bankiuptcy and the granting of his dis- 
charge therein, and that the judgment was upon a debt prov- 
able in such proceedings and which existed at the time of 
their commencement, it was held that the discharge operated 
upon the judgment and was a good defense to the action. 
McDonald v. Davis, 105 N. Y. 508, 12 N. E. 40. And see 
Boynton v. Ball, 121 U. S. 457, 7 Sup. Ct. 981. But this sec- 
tion of the act does not prohibit the commencemmf of an 
action upon a provable claim against a person who has been 
adjudged a bankrupt under the national bankruptcy law. 
Davidson v. Fisher, 41 JMinn. o63, 43 N. ^Y. 79. 

Foreclosure of 3l<iiiga(jei<. 

The bankruptcy tourt has power to restrain the holder of a 
mortgage on the bankrupt's property from foreclosing it, and 
it is generally proper to do so when the value of the property 



§ 11) SUITS BY AND AGAINST BANKRUPTS. 63 

exceeds the amount secured by the mortgage, or when the 
validity or the amount of the mortgage is in doubt. In re 
Iron Mountain Co., 9 Blatchf. 320, Fed. Cas. No. 7,065; In re 
Sacchi, 10 Blatchf. 29, Fed. Cas. No. 12,200. But at the 
same time, a bill to foreclose a mortgage, to which the bank- 
rupt and his trustee are made defendants, may well be en- 
tertained in a state court, and its prosecution will not be a 
contempt of the bankruptcy court, unless the latter court 
deems it advisable to interfere by injunction. In re Moller, 
14 Blatchf. 207, Fed. Cas. No. 9,700. 

What Actions not Stayed. 

The act does not prevent a plaintiff in a state court from 
having judgment against a bankrupt debtor when he is sued 
jointly with others in an action ex contractu; in such case, 
judgment may be rendered against all, and an order made 
staying execution as to the bankrupt until the question of 
his discharge is determined. Byers v. Bank, 85 111.' 423. 
And the execution of a decree for partition in a state court 
is not arrested because one of the parties to the suit becomes 
a bankrupt; his share of the property vests in his trustee. 
Baum V. Stern, 1 S. C. 415. The state tribunals are not de- 
prived, by mere force of an adjudication in bankruptcy, of 
jurisdiction over suits against the bankrupt. The bank- 
ruptcy court has power to arrest or control the proceedings 
in such suits, when it becomes necessarv for the purposes of 
justice, but when such jjower is not exercised, the jurisdic- 
tion of the ordinary courts remains unimpaired and their 
judgments are valid. In re Davis, 1 Wawy. 260, Fed. Cas. No. 
3,620. See also Hewett v. Norton, 1 Woods, 68, Fed. Cas. 
No. 6,441. No stay is authorized which hinders the use of 
the orderly methods for the collection of taxes during the 
pendency of the bankruptcy proceedings. In re Duryee, 2 
Fed. 68. After the property of a bankrupt has been sold and 
the proceeds received, and neither the court nor the assignee 



64 BANKRUPTS. (Ch. 3 

nor the creditors have any further interest in it, the court 
will not interfere, at the instance of the purchaser, to pre- 
vent, by injunction, parties from asserting any claims they 
may have, or pretend to have, against the property, in any 
of the courts of the several states ; and this, notwithstanding 
no final distribution has been made in the bankruptcy. The 
bankruptcy court will not interfere where no advantage can 
result to the bankrupt's estate. Adams v. Crittenden, 17 
Fed. 42. In dealing with this subject-matter, the act of 1867 
provided that suits in the state courts should be stayed "upon 
the application of the bankrupt." And under this clause it 
was held that the debtor was under no obligation to obtain 
a stay. He might allow the suit to proceed to judgment 
without forfeiting his right to avail himself of his discharge, 
if he should subsequently obtain it. Whyte v. McGovern, 
51 N. J. Law, 356, 17 Atl. 957. It was also the rule pre- 
scribed by the earlier statute that such suits should only be 
stayed when there was "no unreasonable delay on the part 
of the bankrupt in endeavoring to obtain his discharge." 
Eev. St. § 5106. Under this clause, it was held that a stay 
should not be p-ranted when the application for discharge had 
been pending without action by the bankrupt for more than 
eight years. In re Sweet, 36 Fed. 761. 

Effect of the Stay. 

"The stay does not operate as a bar to the action, but only 
as a suspension of proceedings until the question of the 
bankrupt's discharge shall have been determined in the 
United States court sitting in bankruptcy. After the deter- 
mination of that question in that court, the court in which 
the suit is pending may proceed to such judgment as the cir- 
cumstances of the case may require. If the discharge is re- 
fused, the plaintiff, upon establishing his claim, may obtain 
a general judgment." Gray, J., in Hill v. Harding, 107 U. S. 
633, 2 Sup. Ct. 404. A defendant in an action at law, who 



§ 11) SUITS BY AND AGAINST BANKRUPTS. 65 

has beeu adjudged a bankrupt, may interpose his plea to that 
effect at any time before judgment. Block v. Fitche, 33 La. 
Ann. 1094. A sale under execution issuing from the state 
court during the pendency of bankruptcy proceedings against 
the judgment debtor is invalid and passes no title. Stem- 
mons V. Burford, 39 Tex. 3-52; Stinson v. McMurray, 6 
Humph. 339. 

Violation of Order Staying Suits, 

Where a bankrupt obtained an injunction order from the 
bankruptcy court staying all suits and proceedings against 
him on the part of certain creditors, their agents and attor- 
neys to collect certain specified debts, and thereupon a suit 
by one of the creditors was discontinued, and afterwards a 
new suit was brought through the same attorneys in the 
state court for the recovery of the same debt, with allegations 
of fraud, it was held that this was a violation of the injunc- 
tion order. In re Schwarz, 14 Fed. 787, 

Intervention of Trustee i/n Pending Suits, 

When there is a suit pending at the time of the adjudica- 
tion, in which the bankrupt is the plaintiff on the record, the 
trustee may either have himself substituted as plaintiff, or he 
may consent that the bankrupt shall continue to prosecute 
the action in his own name. Thatcher v. Rockwell, 105 U. S. 
467. The right, of action is the same if the bankrupt be one 
of several joint plaintiffs. Thus, where husband and wife 
were jointly prosecuting a suit in respect to the wife's chose 
in action^ and during its pendency the husband went into 
bankruptcy, his trustee should join with the wife in the fur- 
ther conduct of that suit. In re Boyd, 2 Hughes, 349, Fed. 
Cas. No. 1,745. But the trustee has his option whether to 
intervene or not; and if he is satisfied that nothing is to be 
gained for the estate by his prosecuting or defending the suit, 
his duty requires him to take no part in the litigation, and 
BL. B.iNK.— 5 



GG ' BANKRUPTS. fCh. 3 

no court has power to compel him to become a party to the 
action. Serra v. Hoffman, 29 La. Ann. 17. If he elects to 
proceed, it must be in his own name and not in that of the 
bankrupt. Dessau v. Johnson, 66 How. Prac. 4. And if he 
declines to prosecute a right of action which is pending at the 
time of bankruptcy, the bankrupt may maintain a suit thereon 
in his own name and for his own benefit. Kamsey v. Fellows, 
58 N. H. 607. An action which is in progress when the de- 
fendant is adjudged a bankrupt may, upon due notice to the 
trustee, be prosecuted to final judgment against the latter in 
his representative capacity, provided the bankruptcy court 
does not see fit to arrest the proceedings; but such judgment 
is not effectual for purposes of execution, but only as an as- 
certainment of the amount due the creditor and as a basis of 
dividends. Norton v. Switzer, 93 U. S. 355 ; Eyster v. Gaff, 91 
U. S. 521. Where an action is pending in a state court of 
competent jurisdiction to enforce a specific lien on property 
of the debtor, the subsequent bankruptcy of the debtor does 
not divest the state court of its jurisdiction to proceed to a 
final decree in the cause and execute the same. The trustee 
in bankruptcy may intervene in such action, but the jurisdic- 
tion of the state court and the validity of its decree are not 
affected by his failure to do so. Kimberling v. Hartly, 1 Fed. 
571. Tenants in common must join in an action to recover 
the earnings of their vessel, unless there is an excuse for the 
severance of the claim; but the bankruptcy of one owner is 
not an excuse; in such case the assignee of the owner who 
Is in bankruptcy must be joined with the solvent owners, or if 
an assignee has not been appointed when the suit is com- 
menced, an action may be supported in the names of the bank- 
rupt and other owners until an assignee comes in. Stinson v. 
Fernald, 77 Me. 576, 1 Atl. 742. 



§ 11) SUITS BY AND AGAINST BANKRUPTS. 67 

Limitations of Act! nn-'^hy and against Trustees — What is a 
Suit within this Clauw. 

Where a judgment in a state court was rendered against 
one who was shortly thereafter adjudged a bankrupt, the 
suing out a writ of error to that judgment by the trustee was 
held to be a "suit" within the meaning of the clause of limita- 
tions. Jenkins v. International Bank, 106 U. S. 571, 2 Sup. 
Ct. 1; International Bank v. Jenkins, 107 HI. 291. But the 
substitution of the trustee as plaintiff in a pending action is 
not to be regarded as a bringing of suit by him within the 
meaning of the statute; the suit begins when the summons or 
other process is issued. Chicago &c. R. B. v. Jenkins, 103 111. 
588. And where an action is pending in which the bankrupt 
is plaintiff, and the trustee, after the statute of limitations 
has run against him, applies to be made a party thereto by 
amendment, such amendment will not have the effect to relate 
back to the commencement of the suit and make the trustee 
a party ab initio; for this would amount to an evasion of the 
statute. Cogdell v. Exum, 69 N. 0. 464. The limitation does 
not apply to a bill in equity brought bv trustees under a will 
to obtain the instructions of the court, in which a trustee in 
bankruptcy of one of the cestuis que trust under the will is a 
party defendant. Minot v. Tappan, 127 Mass. 333. 

To what Actions the Statute Applies. 

The clause "applies to all judicial controversies between 
the assignee and any person whose interest is adverse to his, 
in behalf of the bankrupt's estate." Scovill v. Shaw, 4 Cliff. 
549, Fed. Cas. No. 12,552; Walker v. Towner, 4 Dill. 165, Fed. 
Cas. No. 17,089; Bailey v. Glover, 21 Wall. 342. It applies to 
suits by trustees to collect the debts and assets of the estate, 
as well as to actions relating to specific property. Payson v. 
Coffin, 4 Dill. 386, Fed. Cas. No. 10,858; Ross v. Wilcox, 134 
Mass. 21. It applies to all cases where adverse claims are 
made to property which the trustee found in the possession of 



68 BANKRUPTS. (Oh. 3 

the bankrupt and of which he took charge in good faith as 
the property of the bankrupt. Esmond v. Apgar, 76 N. Y. 359. 
It applies to an action by the trustee of a bankrupt corpora- 
tion to enforce against stockholders the payment of their un- 
paid shares. Payson v. Coffin, 5 Dill. 473, Fed. Cas. No. 10,- 
859. It also applies to actions brought in the name of the 
trustee though wholly for the benefit of a third party. Pike 
V. Lowell, 32 Me. 245. But a suit in equity, brought against 
a bankrupt and his trustee, to foreclose a mortgage executed 
by the bankrupt, is not barred by the limitation. G-ilder- 
sleeve v. Gaynor, 4 Woods, 541, 15 Fed. 101. And it has no 
reference to suits growing out of the dealings of the trustee 
with the estate after it comes into his hands; "these are mat- 
ters for which he may be made personally responsible, and no 
reason existed for changing the general period of limitation 
any more than in the case of any other trustee dealing with 
trust property." Nelson, J., in Re Conant, 5 Blatchf. 54, Fed. 
Cas. No. 3,086. And further, the limitation applies only to 
actions by and against the trustee in respect to interests ex- 
isting in some claimant other than the bankrupt himself. 
Phelps V. McDonald, 99 U. S. 298; Clark v. Clark, 17 How. 
315. 

Concealed Frauds. 

When the cause of action on which the trustee sues is 
based on a secret transfer or fraud concealed by the parties 
thereto, which he could not earlier have discovered by the ex- 
ercise of due diligence, the limitation is not to be considered 
as running against him until the discovery of such fraud. Ty- 
ler V. Angevine, 15 Blatchf. 536, Fed. Cas. No. 14,306; Eosen- 
thal V. Walker, 111 U. S. 185, 4 Sup. Ct. 382; Bailey v. Glover, 
21 Wall. 342; Cook v. Sherman, 4 McCrary, 20, 20 Fed. 167. 

Accruing of Trustee's Title. 

The limitation does not begin to run against the trustee, in 
respect to rights in property previously assigned for the bene- 



§ 12) ■ COMPOSITIONS, WHEN CONFIRMED. 69 

fit of creditors, until he has procured a decree setting aside 
the assignment, and has thus clothed himself with the title of 
the assignee. Tappan v. Whittemore, 15 Blatchf. 440, Fed. 
Cas. No. 13,750. But the fact that a trustee in bankruptcy 
did not discover his right to certain property of the bankrupt 
until after the expiration of two years from the time an action 
accrued to him therefor, does not remove the bar of the stat- 
ute. Norton v. De La Villebeuve, 1 Woods, 163, Fed. Cas. No. 
10,350. But the limitation does not apply to suits by trustees 
or their grantees for the recovery of real estate until after 
two years from the taking of adverse possession. Banks v. 
Ogden, 2 Wall. 57. 



COMPOSITIONS, WHEN CONFIRMED. 

§ 12. a A. bankrupt may offer terms of composi- 
tion to his creditors after, but not before, he has 
been examined in open court or at a meeting of 
his creditors and filed in court the schedule of his 
property and list of his creditors, required to be 
filed by bankrupts. 

h An application for the confirmation of a com- 
position may be filed in the court of bankruptcy 
after, but not before, it has been accepted in -vrrit- 
ing by a majority in number of all creditors whose 
claims have been allowed, w^hich number must 
represent a majority in amount of such claims, and 
the consideration to be paid by the bankrupt to his 
creditors, and the money necessary to pay all debts 
w^hich have priority and the cost of the proceed- 
ings, have been deposited in such place as shall be 
designated by and subject to the order of the judge. 
c A date and place, with reference to the conven- 
ience of the parties in interest, shall be fixed for 



70 BANKRUPTS. CCh. 3 

the hearing upon each application for the confirma- 
tion of a composition, and such objections as may 
be made to its confirmation. 

d The judge shall confirm a composition if satis- 
fied that (1) it is for the best interests of the credit- 
ors ; (3) the bankrupt has not been guilty of any 
of the acts or failed to perform any of the duties 
which would be a bar to his discharge; and (3) the 
offer and its acceptance are in good faith and have 
not been made or procured except as herein pro- 
vided, or by any means, promises, or acts herein 
forbidden. 

e Upon the confirmation of a composition, the 
consideration shall be distributed as the judge shall 
direct, and the case dismissed. Whenever a com- 
position is not confirmed, the estate shall be ad- 
ministered in bankruptcy as herein provided. 

Constitutionality. 

That clause of the bankrupt law which relates to composi- 
tions with creditors is Talid and constitutional, inasmuch as the 
power given to Congress by section 8 of article 1 of the Consti- 
tution must be held to be general, unlimited, and unrestricted, 
over the whole subject of bankruptcy. In re Reiman, 7 Ben. 
455, Fed. Cas. No. 11,673; Id., 12 Blatchf. 562, Fed. Gas. No. 
11,675. 

TJieory and Practice of Compositions. 

The theory of a composition is that the cash value of the 
bankrupt's estate is substantially divided among the creditors 
in proportion to their respective debts. In re Lissburger, 2 
Fed. 153. Whether it is expedient to accept the percentage 
offered by a bankrupt is a question for the creditors primarily 
to determine. And although the percentage may be very 
small, when they have determined it, and their action has been 



§ 12) COMPOSITIONS, WHEN CONFIRMED. 71 

approved by the district court, the appiellate court will not 
interfere upon review. In re Joseph, 24 Fed. 137. A bank- 
rupt from whom a composition is received is necessarily at lib- 
erty to deal with his assets as he chooses. The creditors have 
no concern in the matter if their composition be paid and no 
fraud practiced. He may pledge or sell his stock to one or 
more of his creditors to raise money to pay the composition, 
where there is no concealment practiced or unfairness to others. 
In re Shaw, 9 Fed. 495. An adjudication that the bankrupt 
is not entitled to a discharge will not bar proceedings for a 
composition with his creditors. In re Joseph, 24 Fed. 137. 
See In re Hannahs, 8 Ben. 533, Fed. Oas. No. 6,033. Where 
a petition in voluntary bankruptcy was filed, but before any 
adjudication, proceedings in composition were begun, it was 
held that an adjudication ought not to be made merely because 
certain creditors asked it, if the debtor did not desire it. In re 
Alsberg, 9 Ben. 17, Fed. Cas. No. 260. A discharge of a bank- 
rupt in composition proceedings, after a previous refusal to 
grant him a discharge because of fraud, is binding on all cred- 
itors of whom the court had jurisdiction, and is a bar to sup- 
plementary proceedings based on a judgment obtained by one 
of such creditors after the refusal of the discharge, but before 
the adjudication in the composition proceedings. Leo v. Jo- 
seph, 56 Hun, 644, 9 N. Y. Supp. 612. 

Objections to Composition. 

Where certain creditors objected to the confirmation of a 
composition, on the ground that it had not been assented to by 
the requisite number of creditors in accordance with the 
debtor's statement presented at the creditors' meeting (which 
appeared to be the fact), but it wiis claimed by the debtor that 
the statement was inaccurate, and that an accurate state- 
ment would show the composition to have been duly agreed to 
(which also appeared to be true), it was held that it was too 
late to amend the statement after the composition had been 
presented to the court, and the motion must be rejected, but 



72 BANKEUPTS. (Ch. 3 

with' leave to renew the composition when the statement should 
have been amended in the manner provided by law. In re 
Asten, 8 Ben. 350, Fed. Cas. No. 594. 

Terms of Composition. 

A composition of twenty per cent, payable in money, on time, 
secured by notes, leaving certain real estate which had passed 
to the trustee to be converted into money and paid to the cred- 
itors in addition, is a lawful composition. In re Wronkow, 
15 Blatchf . 38, Fed. Cas. No. 18,105. A resolution of compo- 
sition, by which the creditors agree to accept payment in notes., 
is bad in substance; but the payments may be in installments, 
and deferred payments secured by notes. In re Langdon, 2 
Lowell, 387, Fed. Gas. No. 8,058. 

Rights of Secured Creditors. ^ 

The provisions of the act relating to compositions design 
that every creditor should receive the same proportion of his 
debt ; now a secured creditor is a creditor for all that part of 
his claim which is not covered by the security; hence, when- 
e\er it is discovered that there is a deficit, after realizing on 
the security, that deficit constitutes a charge against the bank- 
rupt of which he must pay the same proportion as he has paid 
to the unsecured creditors, and it makes no difference that 
such discovery was not made until after the composition was 
effected. Paret v. Ticknor, 4 "Dill. Ill, Fed. Cas. No. 10,711. 
So where, in the composition proceedings, certain notes were 
classed as secured debts, but no valuation of the security was 
made, and it subsequently failed to realize the full amount of 
the debt, it was held that, as to the deficiency, the creditor was 
entitled to recover the same percentage as had been paid to 
the general creditors. Flower v. Greenbaum, 9 Biss. 455, 2 
Fed. 897. Composition proceedings do not operate to deprive 
a secured creditor of the right, after exhausting his own se- 
curity and ascertaining the amount unpaid, to assert against 
the bankrupt a claim for the deficiency, and such claim may be 



§ 12) COMPOSITIONS, M'HEN CONBIEMED. 73 

enforced through the instrumentality of an execution issued 
against the property of the debtor upon the deficiency judg- 
ment. Oavanna v. Bassett, 3 Fed. 215. 

Effect on Creditors not Joining. 

An order in composition proceedings, based upon a resolu- 
tion passed by the requisite majority of the creditors, cannot 
deprive a non-consenting creditor of a vested right with which 
the bankruptcy court has no power otherwise to interfere. In 
re Stowell, 24 Fed. 468. A creditor whose name did not ap- 
pear in the statement of the debtor or otherwise in composition 
proceedings, and whose debt is not mentioned, is not bound 
thereby. In re Blackmore, 11 Fed. 412; Robinson v. Soule, 
56 Miss. 549. Where a composition proposed by a bankrupt 
has been accepted by his creditors and approved by the court, 
the bankrupt is thereby discharged only from the claims of the 
creditors whose names, addresses, and debts are placed on the 
statement produced at the meeting of creditors. In re Becket, 
2 Woods, 173, Fed. Cas. No. 1,210. 

Proceedings Vitiated hy Fraud. 

Where, upon a composition in bankruptcy, a particular cred- 
itor, by means of a secret bargain, secures to himself an undue 
advantage over the rest of the creditors, it is a fraud upon the 
other creditors, and he cannot enforce the agreement. Wood- 
man V. Stow, 11 111. App. 613; Russell v. Rogers, 10 Wend. 
473; Tinker v. Hurst, 70 Mich. 159, 38 N. W. 16; Carey v. 
Hess, 112 Ind. 398, 14 N. E. 235; Brownsville Mfg. Co. v. 
Lockwood, 11 Fed. 705. A bankrupt and the defendant, one 
of his creditors, agreed that, in consideration that defendant 
should procure a composition which the bankrupt had offered 
to his creditors, the bankrupt would pay to the defendant a 
specified sum in addition to all disbursements. Defendant 
thereupon bought certain large claims, paying a larger sum for 
them than the percentage provided for in the composition 
would amount to, and voted such claims in favor of the compo- 



74 BANKRUPTS. (Ch. 3- 

sition, as attorney for the original holders of them, concealing^ 
the assignment, and, the composition having been thus pro- 
cured and confirmed, received a transfer of the bankrupt estate. 
It was held that the agreement and composition were fraudu- 
lent, and the assignee could recover the property. Fairbanks- 
y. Amoskeag Nat. Bank, 38 Fed. 630. In another case, it ap- 
peared that the bankrupt's book-keeper made an offer of mon- 
ey to two several creditors to induce them to consent to a pro- 
posal of composition. One of the creditors accepted the money 
and agreed to the composition. Of these transactions the bank- 
rupt had no actual knowledge, but the book-keeper was em- 
ployed generally to procure the consent of the creditors. On 
this state of facts, it was held that the bankrupt was chargeable 
with what his representative did in the matter, and that, un- 
fair advantage having been offered to some of the creditors,, 
the whole proceeding was thereby vitiated and the composition 
must fail. In re Bennett, 8 Ben. 561, Fed. Cas. No. 1,312. 

Effect of Composition as a Discharge. 

Composition proceedings, duly confirmed by the court, oper- 
ate as a discharge of the bankrupt. In Be Bjornstad, 11 Biss. 
13, 5 Fed. 791. But an action on a debt or claim is not barred 
by composition proceedings if it would not be barred by the 
debtor's discharge under the act. Wilmot v. Mudge, 103 U. 
S. 217; Bayly v. University, 106 U. S. 11, 1 Sup. Ct. 88; Ex 
parte Halford, L. E. 19 Eq. 436. Such proceedings will not 
operate to release and discharge one jointly indebted with the 
bankrupt. Moore v. Stanwood, 98 111. 605. Nor will they re- 
lease the debtor from any fiduciary debt. Succession of 
Bayly, 30 La. Ann. 75. Composition proceedings do not dis- 
charge the bankrupt from a contingent liability unless such 
liability was included in his schedule of debts, and the creditor 
holding it was notified that a discharge was sought. Flower 
V. Grreenbaum, 9 Biss. 455, 2 Fed. 897. The acceptance of a 
composition from the principal debtor does not discharge any 



§ 12) COMPOSITIOKS, WHEN CONFIRMED. 75' 

party collaterally liable for the same debt. In re Burchell, 4 
Fed. 406. If the time has expired for the performance of a 
composition, and performance has not been made, the creditor 
may maintain an action on his original claim. Harrison v. 
Gamble, 69 Mich. 96, 36 N. W. 682; Pupke v. Churchill, 91 
Mo. 81, 3 S. W. 829. Composition proceedings are in the 
nature of accord and satisfaction, and the effect of a resolution 
duly passed and confirmed is that the creditors bound thereby 
agree to accept a composition or part of the debt in discharge 
of the whola In a suit by a creditor affected by composition 
proceedings under the bankrupt act brought hefore the ex- 
piration of the time for performance of the terms of the com- 
position, the defendant need only plead the proceedings to and 
including the record of the resolution; but if brought after 
the expiration of such time, and the plaintiff can make out his 
case without showing the composition, the defendant must not 
only set up such proceedings in bar, but he must aver perform- 
ance on his part, or a sufficient excuse for nonperformance. 
Harrison v. Gamble, 69 Mich. 96, 36 N. W. 682; Browning v. 
Crouse, 43 Mich. 489, 5 N. W. 664. A composition proceeding 
not carried out, nor performance of the resolution tendered by 
the insolvent, is an accord without a satisfaction. It is not 
a discharge of the debt, and will not prevent a creditor from 
pursuing his action to recover his debt. Ransom v. Geer, 12 
Fed. 607. The bankruptcy court will not issue its injunction 
to restrain an action brought in the state court by a creditor 
seeking to recover his whole debt from a bankrupt who has 
effected a composition. In re Negley, 20 Fed. 499. 

Title Revesting in Bankrupt. 

The result of a composition is, that the legal title to the 
effects of the bankrupt remains in him. If the composition 
is effected before an adjudication and assignment, the title is , 
never divested ; if afterwards, it is re-invested in him. Ligon 
v. Allen, 56 Miss. 632. 



76 BANKRUPTS. (Ch. 3 

COMPOSITIONS, WHEN SET ASIDE. 

§ 13. a The judge may, upon the application of 
parties in interest filed at any time within six 
months after a composition has been confirmed, set 
the same aside and reinstate the case if it shall be 
made to appear upon a trial that fraud -was prac- 
ticed in the procuring of such composition, and 
that the kno-wledge thereof has come to the peti- 
tioners since the confirmation of such composition. 

Setting Aside Composition. 

A creditor who, with full knowledge of the schedule esti- 
mates, voted for a composition and received payment un- 
der it, is precluded from seeking to set aside the composi- 
tion for mere inadequacy, or because it ultimately turns 
out that a larger amount might have been offered and paid, 
when the schedules show with substantial correctness the 
situation of the estate. In re Shaw, 9 Fed. 495. "V^Tiere 
a composition iS set aside, a workman, employed by the 
debtor during the time when the composition was in force, 
is entitled to payment of his wages earned during that 
period. In re Wells, 4 Fed. 68. In a proceeding to set aside 
a composition in bankruptcy after it has been fully ex- 
ecuted, a sale of the bankrupt's stock and fixtures, made 
prior to the adjudication in bankruptcy, will not be dis- 
turbed on the ground of the inadequacy of price in a doubt- 
ful case, nor upon other grounds known to the creditors 
accepting the composition, although it might probably have 
been avoided by an assignee in bankruptcy. In re Shaw, 
9 Fed. 495. 



§' 14) DISCHARGES, WHEN GRANTED. 77 

DISCHARGES, WHEN GRANTED. 

§ 14. a Any person may, after the expiration of 
one month and -within the next twelve months sub- 
sequent to being adjudged a bankrupt, file an ap- 
plication for a discharge in the court of bankruptcy 
in -which the proceedings are pending ; if it shall 
be made to appear to the judge that the bankrupt 
-was unavoidably prevented from filing it -within 
such time, it may be filed -within but not after the 
expiration of the next six months. 

i> The judge shall hear the application for a dis- 
charge, and such proofs and pleas as may be made 
in opposition thereto by parties in interest, at such 
time as -will give parties in interest a reasonable 
opportunity to be fully heard, and investigate the 
merits of the application and discharge the appli- 
cant unless he has (1) committed an offense punish- 
able by imprisonment as herein provided; or (2) with 
fraudulent intent to conceal his true financial con- 
dition and in contemplation of bankruptcy, de- 
stroyed, concealed, or failed to keep books of ac- 
count or records from -which his true condition 
might be ascertained. 

c The confirmation of a composition shall dis- 
charge the bankrupt from his debts, other than 
those agreed to be paid by the terms of the compo- 
sition and those not affected by a discharge. 

Application for Discharge. 

Under the former bankrupt law, in cases where no debts 
had been proved against the bankrupt, or if no assets had 
come to the hands of the assignee, the court might grant 
a discharge to the bankrupt, although not applied for with- 



78 BANKRUPTS. C^^h. 3 

in a year, where the delay was satisfactorily excused. In 
re Donaldson, 2 Dill. 546, Fed. Cas. No. ;i,982; In re Lowen- 
stein, 3 Dill. 14.5, Fed. Gas. No. 8,573; In re Canady, 2 Biss. 
75, Fed. Cas. No. 2,377. See, also, In re Sloan, 13 Blatchf. 
67, Fed. Cas. No. 12,945. But it will be perceived that 
the present act makes no such exception, and allows thi> 
filing of an application, after the prescribed limitation of 
twelve months has expired, only in case the bankrupt was 
"unavoidably prevented" from making his application with- 
in that time. Proceedings in bankruptcy, it is held, 
amount to an injunction against any proceedings against 
the bankrupt to enforce his contracts in the courts, but 
if he delays for an unreasonable time to apply for his dis- 
charge, the right of action against him upon his contracts 
or debts, which was suspended by the commencement of 
proceedings in bankruptcy, revives, and during the time 
that the right of action was suspended by the bankruptcy 
proceedings the statute of limitations will not run in his 
iavor. Greenwald v. Appell, 17 Fed. 140. See, also. In 
re Kelly, 3 Fed. 219. The fact that the trustee in bank- 
ruptcy has been discharged, will not necessarily deprive the 
bankrupt of the right subsequently to apply for his own 
discharge. In re Forsyth, 4 Fed. 629. The court has au- 
thority to allow a bankrupt to withdraw his petition for 
discharge, no adjudication having passed upon it, and to 
file a new one at a later day. In re Svenson, 9 Biss. 69, 
Fed. Cas. No. 13,659. The first petition of a bankrupt for 
his discharge having been denied, but not upon the merits, 
upon a subsequent application and a hearing before the 
register thereon, upon the objections first filed, the testi- 
mony of a witness taken on the hearing on the first petition 
is competent evidence on the second proceeding, the wit- 
ness having in the mean time died. In re Brockway, 12 
Fed. 69. Where the bankrupt dies after his application 
for discharge has been favorably reported by the master, 
the court has jjower to order the discharge to be entered 



§ 14) DISCHARGES, WHKN GRANTED. 79 

nunc pro tunc as of the date when the master's report was 
first filed. Young v. Kidenbaugh, 3 Dill. 239, Fed. Cas. 
No. 18,173. The law, in relation to the granting of dis- 
charges, applies both to cases of voluntary and involun- 
tary bankruptcy. In re Clark, 2 Biss. 73, Fed. Cas. No. 
2,800. Any creditor who has a provable debt against a 
bankrupt may apply to the court to require the bankrupt 
to have the question of his discharge determined. In re 
Fowler, 2 Low. 122, Fed. Cas. No. 4,999. 

J^sentials to Validity of Discharge. 

In order to the validity of a discharge in bankruptcy it 
is essential that the court should have acquired jurisdic- 
tion of the bankrupt by his residence (or his doing business) 
■within the district. Stiles v. Lay, 9 Ala. 795. And cred- 
itors may oppose the bankrupt's application for discharge 
on the ground that the court never acquired jurisdiction of 
the case. In re Penn, 4 Ben. 99, Fed. Cas. No. 10,926. The 
act further provides (section 58) that "creditors shall have 
at least ten days' notice by mail, to their respective ad- 
dresses as they appear in the list of creditors of the bank- 
rupt, or as afterwards filed with the papers in the case by 
ihe creditors, of ' * * all hearings upon applications 
for the discharge of bankrupts." Under a similar provision 
in the former law, it was held that, if no such notice was 
given to creditors, as required, the certificate of discharge 
should be vacated. Allen v. Thompson, 10 Fed. 116. But 
it is not essential to the debtor's discharge that the trustee 
in bankruptcy should have given due notice of his appoint- 
ment. In re Littlefield, 1 Low. 331, Fed. Cas. No. 8,398. 

Opposition to Discharge; WJw may Oppose. 

A creditor whose debt is provable, though not proved, 
may oppose the discharge of the bankrupt. In Re Mur- 
dock, 1 Low. 362, Fed. Cas. No. 9,939. But creditors who 
Jhave not proved their claims until after the day fixed .for 



80 BANKRUPTS. (Ch. 3 

showing cause against the bankrupt's discharge, cannot then 
make objection to the discharge upon any other ground than 
fraud distinctly and specifically charged. In Ee Balmer, 3 
Hughes, 637, Fed. Gas. No. 820; Hester v. Baldwin, 2 
Woods, 433, Fed. Gas. No, 6,438. If a preferred creditor 
abandons his security, and is admitted to prove his debt, 
the preference is condoned and cannot be set up by way of 
opposition to the bankrupt's discharge. In re Gonnor, 1 
Low. 532, Fed. Gas. No. 3,118; In re Donnelly, 5 Fed. 783. 
The acceptance of a dividend under an unlawful assign- 
ment does not estop a creditor from objecting to the dis- 
charge of the assignor under subsequent proceedings in 
bankruptcy, where such creditor had no power to dissent 
from, repudiate, or avoid such assignment. In re Kraft, 
3 Fed. 892. Although it is good ground of objection to 
the discharge that the debtor concealed or removed his 
property with intent to defraud his creditors, yet a person 
who was not a creditor of the bankrupt at the time of such 
concealment or removal, or whose debt was then barred 
by lapse of time, could not have been defrauded thereby, 
and therefore cannot make that objection. In re Burk, 
Deady, 425, Fed. Gas. No. 2,156. It is well settled that the 
burden of sustaining specifications of objection to th'e dis- 
charge of a bankrupt rests upon the opposing creditors. 
In re Herdic, 1 Fed. 242. 

Same; Pleadings. 

Allegations in opposition to a discharge are not sufficient 
when they simply follow the words of the statute; they 
must be as exact as the specifications in an indictment, 
and no intendment will be made in favor of the pleader. 
In re Butterfield, 5 Biss. 120, Fed. Gas. No. 2,247; In re Hill, 
2 Ben. 136, Fed. Gas. No. 6,482; In re Freeman, 4 Ben. 245, 
Fed. Gas. No. 5,082. Where the specifications of objec- 
tion to the bankrupt's discharge are insufficient in law to 
pre.vent such discharge, the bankrupt may take advantage 



§ 14) DISCHARGES, WHEN GRANTED. 81 

thereof by demurrer. In re Burk, Deady, 425, Fed. Gas. 
No. 2,156. After issue has been joined on the specifica- 
tions filed in opposition to the discharge, and evidence 
taken, without any allegation that the charges are insuffi- 
cient, it is too late to permit an amendment of the specifica- 
tions which would introduce an entirely new ground of 
objection and present a separate and distinct issue for the 
consideration of the court. In re Graves, 24 Fed. 550. 

Grounds for Refim/ng Discharge; Omission of Assets from 

Schedules. 

A mere omission to include all his property in his sched- 
ule is not of itself cause for refusing a bankrupt his dis- 
charge; the omission must be for the purpose of conceal- 
ment or to mislead or defraud. In re Smith, 1 Woods, 
478, Fed. Cas. No. 12,995; In re Boynton, 10 Fed. 277. And 
the fact that a bankrupt has omitted to state in his sched- 
ule certain obsolete and worthless demands, upon which 
no action could be maintained, does not tend to prove him 
guilty of fraud so as to bar his discharge. In re Pearce, 
21 Vt. 611. So where the bankrupt omits from his schedule 
the names of certain persons to whom he is indebted, but 
with their consent, and for the reason that they do not 
intend to take dividends in competition with the trade cred- 
itors, and do not wish to be considered creditors of his 
estate, and no fraud or injury to the rights of the other 
creditors is shown; this will not be sufficient to bar his dis- 
charge. In re Needham, 1 Low. 309, Fed. Cas. No. 10,081. 
Biit a wilful omission to state a debt due by the bankrupt 
to another in his schedule is good ground for refusing a 
discharge. In re KalJish, Deady, 575, Fed. Gas. No. 7,599 ; 
In re Whetmore, Deady, 585, Fed. Gas. No. 17,508. Though 
if such omission is made in consequence of a private ar- 
rangement with the creditor, that particular creditor will 
not be allowed to oppose the bankrupt's discharge on that 
ground. In re Whetmore, supra. 
BL. BANK-6 



82 BANKRUPTS. (Ch. 3 

Same; Preferences and Fraudulent Conveyances. 

Payments of money, or transfers or conveyances of prop- 
erty, by one in insolvent circumstances, and with the open 
purpose of preferring a part of his creditors, but made prior 
to the passage of the bankrupt act, are indeed fraudulent, 
when he is afterwards adjudicated a bankrupt, but they 
are not a bar to his discharge. In re Hollenshade, 2 Bond, 
210, Fed. Cas. No. 6,610. Same point in Ee Eosenfield, 7 
Am. Law Eeg. N. S. 620, Fed. Cas. No. 12,058, where Field, 
J., says, "To have held that acts committed before its pas- 
sage were offenses against the bankrupt law, would have 
been to maJce that law, if not an ex post facto law, in the 
strict sense of the term, yet at least a law retroactive or 
retrospective in its character." And see In re Wolfskill, 
5 Sawy. 385, Fed. Cas. No. 17,930. So, however obnoxious 
to the bankrupt act may be a general assignment for the 
benefit of creditors made prior to the petition in bankruptcy, 
such assignment cannot be urged in opposition to the bank- 
rupt's discharge by any creditors who chose, at that time, 
to ratify it and take action under it for the protection of 
their claims; this on the principle of equitable estoppel. 
In re Schuyler, 3 Ben. 200, Fed. Cas. No. 12,494. 

Same; Other Grounds of Sefusal. 

The right of a bankrupt to a discharge depends upon his 
own acts. Unless a party thereto, he is not bound by the 
acts of commission or omission of his former partner. In re 
Heller, 9 Fed. 373. And the fraud contemplated by the 
statute as a bar to the bankrupt's discharge is fraud in fact, 
involving moral turpitude, — intentional wrong. In re Warne, 
10 Fed. 377. Gifts by a bankrupt to his wife and daughter, 
previous to the bankruptcy, although they may be voidable 
by his creditors, do not necessarily involve such moral turpi- 
tude as would justify the refusal of a discharge. In re 
Warne, 12 Fed. 431. But where a merchant, being insolvent. 



§ 14) DISCHARGES, WHEN GRANTED. 83 

permitted and authorized certain of his creditors to take away 
his goods in payment of their debts, it was held that he could 
not be discharged; not only were the preferences fraudulent, 
but it was his duty to protect his assets against such losses. 
In re Vernia, 5 Fed. 723. A false statement made by the 
bankrupt upon his examination, as to the existence of books 
of account, will not prevent his discharge, if it appears that 
such statement was against his own interest, and apparently 
without motive, and the circumstances indicate that it was 
innocently and not wilfully made. In re Warne, 12 Fed. 
431. Under the terms of the bankrupt law of 1867 (Eev. 
St. § 5110, cl. 5), it was made a bar to the bankrupt's dis- 
charge if he had lost any part of his estate in "gaming."' 
And it was held that property acquired in gaming was as- 
sets, which if the bankrupt spent in gaming, he would lose 
his discharge. In re Marshall, 1 Low. 462, Fed. Gas. No. 
9,123. And see In re Hunt, 26 Fed. 739. But the present 
statute contains no such provision. 

Keeping Boohs of Account. 

The question what are proper books of account to be kept 
by a merchant, is in each case a question of evidence. In re 
Newman, 3 Ben. 20, Fed. Gas. No. 10,175. But if, from such 
books as were kept by the bankrupt, his financial condition 
and an intelligible account of his business can be ascertained 
with substantial accuracy, the requirements of the bankrupt 
law have been complied with. In re Frey, 9 Fed. 376; In 
re Keach, 1 Low. 335, Fed. Gas. No. 7,629; In re Smith, 16 
Fed. 465. It is held to be indispensable that traders should 
keep a cash-book. In re Bellis, 4 Ben. 53, Fed. Gas. No. 
1,275; In re Gay, 2 N. B. E. 358, Fed. Gas. No. 5,279. And 
the same is true of a stock or invoice book. In re Brock- 
way, 12 Fed. 69; In re White, 2 N. B. R. 590, Fed. Gas. No. 
17,532. As to the inanner of keeping the books, it is said: 
"Congress has not attempted to prescribe any particular sys- 



84 BANKRUPTS. (Ch. 3 

tem or principle of book-keeping. If a competent person, 
upon an examination of the books and papers kept by the 
merchant, is able to reach a substantially correct conclusion 
as to the state of the merciiant's affairs, it is enough." In 
re Graves, 24 Fed. 550. Hence it is no reason to refuse a 
discharge to a bankrupt because there are obscurities in his 
books which need explanation, when those obscurities are 
explained and there is no evidence of fraud or deceit in the 
entries. In re Townsend, 2 Fed. 559. But where the bank- 
rupt kept no books except a small pocket memorandum- 
book, in which he entered each day his cash received and 
cash paid out, a blotter, in which he entered his daily credit 
sales, and a book in which he kept credit accounts, all of 
which were imperfectly kept, it was held that he was not 
entitled to a discharge, even though from these books and 
his invoices kept on file, it may have been possible, with such 
memoranda, to make up proper accounts. In re Vernia, 5 
Fed. 723. It has been said : "A temporary, accidental omis- 
sion, in good faith and for a reasonable time, to make the 
entries, would "not be a failure to keep the books. But a 
cessation to keep them, on purpose, or for an unreasonable 
time, would be. I cannot rule, as requested by the bank- 
rupt's counsel, that if they employed a clerk whom they con- 
sidered competent, and left the whole charge of the books to 
him, they are to be discharared. The law does not require 
traders to keep a book-keeper, but to keep books, and they 
are responsible to see that it is done. * • » Nor can I 
rule that entries on numerous slips of paper, each entry on a 
separate slip, is a keeping of books under the law. As I 
have before ruled, it might do for a short time in the absence 
of the books ; but as a system or policy of a permanent char- 
acter, no." Lowell, J., in re Hammond, 1 Low. 381, Fed. 
Cas. No. 5,999. Where a merchant drew large sums of 
money from his business, from time to time, to use in stock 
speculation, and put slips of paper, with the amounts so 



§ 14) DISCHARGES, WHEN GEANTED. 85 

withdrawn, in the money-drawer, as memoranda for his book- 
keeper, so that, when he failed, his cash-book showed a bal- 
ance of several thousand dollars which did not exist, his dis- 
charge as a bankrupt was refused, on the ground that he did 
not keep proper books of accoiunt. In re Hunt, 26 Fed. 
739. But in a case where the accounts of exceptional trans- 
actions for borrowed money were kept on separate papers, 
which were preserved and turned over to the assignee with 
the books, this was considered a sufticient compliance with 
the law. In re Smith, 16 Fed. 465. But where the debtor 
had carried on a small trade entirely for cash, but had dis- 
continued it for some months before his bankruptcy, and 
there was nothing in the way of debts, assets, or capital out- 
standing, it was held that his failure to keep proper books 
of that trade would not prevent his discharge. In re Keach, 
1 Low. 335, Fed. Cas. No. 7,629. On the hearing of an appli- 
cation for discharge, general objections that the bankrupt 
did not keep proper books of account, are only available in 
showing that he did not keep some necessary books, or that 
the books kept were not as a whole sufficient to show the 
course or condition of the bankrupt's business. If the objec- 
tion be merely that some particular transactions were not 
entered, the objection, to be available, must indicate the omis- 
sions or irregularities complained of. In re Smith, 16 Fed. 
465; In re Frey, 9 Fed. 376. The burden of showing to the 
court that the bankrupt's books of account were not properly 
kept lies upon the creditors, who allege it in their specifica- 
tions, when it appears that full sets of books were kept by 
regular book-keepers, hired and kept for that purpose; that 
such books were all regularly turned over by the bankrupt, 
with the other property, to the trustee in bankruptcy, and by 
him, in his office, throughout the pendency of the bankruptcy 
proceedings, kept subject to examination and inspection by 
the creditors; and that when the proceedings were closed, the 
books were turned over to a person who purchased all the 



86 BANKRUPTS. (Ch. 3 

property. In re Jewett, 3 Fed. 503. See further, on the 
general subject, In re Herdic, 1 Fed. 242; In re Williams, 
13 Fed. 30; In re Eeed, 12 N. B. K. 390, Fed. Gas. No. 11,639. 
Under the bankruptcy act of 1867, it was held to be no de- 
fense to an objection to the bankrupt's discharge on this 
ground, to allege that no fraud was intended, but that the 
failure to keep accounts was due to mere carelessness, for the 
law was explicit. In re Jorey, 2 Bond, 336, Fed. Gas. No. 
7,530. But it is important to notice that the present statute 
makes this a ground for refusing the discharge only when the 
failure to keep books was "with fraudulent intent to conceal 
his true financial condition and in contemplation of bank- 
ruptcy." 

^''Contemplation of Bankruptcy.'''' 

In regard to the interpretation of these words, as used in 
the act, there is some conflict of opinion. It has been held 
that the phrase means a contemplation of a state of bank- 
ruptcy merely, and not necessarily an intention to take the 
benefit of the bankruptcy law; but that this means more 
than an inability tQ_pay debts promptly; it contemplates a 
thorough breaking up of business. McLean v. Lafayette 
Bank, 3 McLean, 587, Fed. Gas. No. 8,888; Everett v. Stone, 
3 Story, 446, Fed. Gas. No. 4,577. But the better opinion 
appears to be that the phrase in question means either (1) 
that the debtor contemplates the commission of an act which 
is, by the statute, made an act of bankruptcy, or (2) that he 
contemplates being adjudged a. bankrupt on his own petition. 
Buckingham v. McLean, 13 How. 151; In re Graft, 6 Blatchf. 
177, Fed. Gas. No. 3,317; Morgan v. Brundrett, 5 Barn. & 
Adol. 289. Compare In re Wolfskill, 5 Sawy. 385, Fed. Gas. 
No. 17,930. 

Buying Assent of Creditors. 

Where one of the creditors, knowing facts sufiicient to bar 
the bankrupt's discharge, is about to file opposition thereto. 



§ 14) DISCHARGES, WHEN GRANTED. 87 

and the bankrupt, with knowledge thereof, pays money to 
such creditor to induce him to forbear opposing the discharge, 
the discharge, when granted, is invalid, and may be im- 
peached on that ground. Coates v. Blush, 1 Gush. 564. And 
see In re Pahner, 2 Hughes, 177, Fed. Cas. No. 10,678; In re 
Svenson, 9 Biss. 69, Fed. Cas. No. 13,659; In re Ekings, 6 Fed. 
170. So where the bankrupt's wife executes a mortgage on 
her separate property, at his request, in pursuance of an 
agreement by which he was to pay the debt of his creditor in 
full if the latter would assent to his discharge, the mortgage 
is without consideration and tainted with the illegality of 
the transaction, notwithstanding it was executed after the 
discharge and although the wife did not know of the agree- 
ment. Blasdel v. Fowle, 120 Mass. 447. It is to be observed 
that the creditor whose assent to the bankrupt's discharge 
was procured by the promise of a pecuniary consideration, is 
estopped from afterwards setting ud the fraud as a ground 
of objection to the discharge; but other creditors, upon learn- 
ing of the fraud, may object to the discharge on that ground. 
In re Bright, 9 Fed. 491. Where a surety of the bankrupt 
pays the debt of a creditor who is opposing the bankrupt's 
discharge, merely for his own purposes, and without consult- 
ing with the bankrupt or informing him of the transaction 
until long afterwards, and the latter had no part in it, nor 
made any promise to repay the amount, this will not vitiate 
his discharge. Ex parte Briggs, 2 Low. 389, Fed. Cas. No. 
1,868. And there is nothing in the bankrupt law which for- 
bids a creditor, before any proceedings in banlaniptcy have 
been commenced, to take from a third person a contract or se- 
curity for the payment of money as an inducement to refrain 
from throwing his debtor into bankruptcy. Ecker v. Bohn, 
45 Md. 278. 



&S BANKRUPTS. (Cb. 3 

Effect of Discharge in Bankruptcy. 

No recovery can be had in a state court on a debt tbat was 
provable against an estate in bankruptcy, after the debtor 
has obtained a discharge under the national bankrupt law, 
unless the debt in question belonged to one of the excepted 
classes. Talbot v. Suit, 68 Md. 443, 13 Atl. 356. And by a 
subsequent discharge in bankruptcy, if a judgment is obtained 
in a state court by a creditor upon a claim provable under the 
bankrupt law, in an action begun before or after the com- 
mencement of the bankruptcy proceedings, and pending such 
proceedings, the bankrupt is discharged from the judgment 
itself the same as from the claim upon which it was founded. 
Leonard v. Yohuk, 68 Wis. 587, 32 N. W. 702; Pine Hill Coal 
Co. V. Harris, 86 Ky. 421, 6 S. W. 24; Boynton v. Ball, 121 U. 
S. 457, 7 Sup. Ct. 981. The debtor having been adjudged a 
banlcrupt and received his discharge, after giving a security 
deed which was void on account of usury, the debt was 
thereby discharged. Broach v. Smith, 75 Gra. 159. But a dis- 
charge in bankruptcy, like the statute of limitations, does not 
annul the original debt or liability of the bankrupt, but 
merely suspends the right of action for its recovery. It there- 
fore follows that no one but the bankrupt can plead his dis- 
charge in avoidance of his liability. He may, if he chooses, 
treat his covenants and obligations as still binding upon him. 
Bush V. Stanley, 122 111. 406, 13 N. E. 249. 

Conchisiveness of Discharge-. 

Where a creditor's name is innocently or accidentally (not 
fraudulently) omitted from the bankrupt's schedule, the dis- 
charge and certificate are conclusive evidence in the bank- 
rupt's favor, and a complete bar to a suit against him by the 
omitted creditor. Hoffman v. Haight, 3 Mackey, D. C. 21; 
Hubbell V. Cramp, 11 Paige, 310; Graves v. Wright, 53 Mich. 
425, 19 N. W. 129. And a discharge in bankruptcy, under 
the national law is a bav to the claim of an alien creditor 



§ 14) DISCHARGES, WHEN GEANTED. 89 

suing in the courts of this country, the same as though he 
were a citizen of the United States. Euiz v. Eickerman, 2 
McCrary, 259, 5 Fed. 790; Murray v. De Rottenham, 6 Johns. 
Ch. 52. All creditors, whether notified of the proceedings or 
not, are concluded by the bankrupt's discharge unless they 
appear within the time limited and assail it for the causes 
specified in the act. Thurmond v. Andrews, 10 Bush. 400. 
So a creditor who has unsuccessfully opposed the bankrupt's 
discharge, is thereby estopped, in a suit which he alterwards 
brings to recover his debt, and to which the defendant pleads 
his discharge, from showing that the discharge was fraudu- 
lently obtained. Wales v. Ly^sn, 2 Mich. 276. And an order 
refusing a discharge is a bar to any second application for dis- 
charge in the same proceedings; jt is a final determination on 
the merits of the controversy and must be regarded as res 
judicata as to the matters involved. In re Brockway, 21 
Blatchf. 136, 23 Fed. 583. 

Collateral Impeachment of Discharge. 

A state court can neither set aside nor disregard a dis- 
charge granted by a court of bankruptcy, nor allow it to be 
impeached collaterally, for fraud or any other cause such as 
would authorize that court to vacate it; it can only be im- 
peached in a direct proceeding for that purpose in the bank- 
ruptcy court itself. Thurmond v. Andrews, 10 Bush, 400; 
Alston V. Kobinett, 37 Tex. 56; Stetson v. Bangor, 56 Me. 286; 
Fuller V. Pease, 144 Mass. 390, 11 N. E. 694; State v. Gaston, 
62 N. J. Law, 321, 19 Atl. 608; Corey v. Ripley, 57 Me. 69; 
Howland v. Carson, 28 Ohio St. 625; Smith v. Ramsey, 27 
Ohio St. 339; Seymour v. Street, 5 Neb. 85; Milhous v. 
Aicardi, 51 Ala. 594; Gates v. Parish, 47 Ala. 157; Parker v. 
Atwood, 52 N. H. 181; Stevens v. Brown, 49 Miss. 597; 
Thomas v. Jones, 39 Wis. 124; Brady v. Brady, 71 Ga. 71. 
But it is stated in Hennessee v. Mills, 1 Baxt. 38, that the 
■discharge can be attacked in a state court for want of juris- 



90 BANKRUPTS. C^h. 3- 

diction in the court granting it; and in Beardsley v. Hall, 3& 
Conn. 270, that it may be attacked collaterally if it be abso- 
lutely void, in consequence of the bankrupt's commission of 
one of the acts forbidden by the bankrupt law. 

Discharge must he Pleaded. 

A discharge in bankruptcy will not avail a defendant, either 
at law or in equity, unless pleaded. Manwarring v. Kouns,. 
35 Tex. 171; Ludeling v. Felton, 29 La. Ann. 719; Goodrich 
V. Hunton, 2 Woods, 137, Fed. Oas. No. 5,544. Hence it is 
not error to exclude a certificate of discharge offered in evi- 
dence when the same has not been pleaded. Horner v. Spel- 
man, 78 111. 206. But of course if the defendant has no op- 
portunity to plead it, he m«y set it up in defense whenever 
the occasion is given. Sanderson v. Daily, 83 N. 0. 67; Parks 
V. Goodwin, 1 Mich. 34. Where the record of a decree shows- 
an absolute discharge in bankruptcy, and that the bankrupt 
was authorized to receive a certificate, it is suflflcient without 
producing the certificate itself. Viele v. Blanchard, 4 G.. 
Greene, 299. 

Second Bankruptcy. 

A bankrupt who has not been discharged, or to whom a dis- 
charge has been refused, and who has contracted new debts 
sufficient in amount to give the court jurisdiction, may file a 
new petition in bankruptcy ; but a discharge under such new 
petition would apply only to new debts, and to such old debts- 
as had been proved anew. In re Drisko, 2 Low. 430, Fed. 
Cas. No. 4,090; Fisher v. Currier, 7 Mete. (Mass.) 424. 



§ 15) DISCHARGES, WHEN KEVOKKD. 91 



DISCHARGES, WHEN REVOKED. 

§ 15. a The judge may, upon the application of 
parties in interest ■who have not been guilty of un- 
due laches, filed at any time within one year after 
a discharge shall have been granted, revoke it upon 
a trial if it shall be made to appear that it -was ob- 
tained through the fraud of the bankrupt, and that 
the kno"V7ledge of the fraud has come to the peti- 
tioners since the granting of the discharge, and 
that the actual facts did not Tvarrant the discharge. 

Sevohing Discharge; Hemedy Exclusive. 

The bankrupt act itself having prescribed the forum, the 
mode, and the time for the direct impeachment of a discharge 
on the ground of fraud or perjury perpetrated in obtaining it, 
the remedy thus given is exclusive. Neither in the federal 
nor in the state courts can it be questioned or attacked collat- 
erally. It is conclusively presumed to be valid and effective 
unless revoked or annulled in the manner prescribed by the act. 
Smith V. Kamsey, 27 Ohio St. 339; Ray v. Lapham, Id. 452; 
May V. Howe, 108 Mass. Ill; Black v. Blazo, 117 Mass. 17; 
Sej-mour v. Street, 5 Neb. 85. 

Jurisdiction and Practice. 

The jurisdiction of a proceeding to annul a discharge per- 
tains alone to the district court which granted the discharge, 
and it seems that such proceeding must be brought by the cred- 
itor, and will not lie at the instance of his representative the 
trustee. Nicholas v. Murray, 5 Sawy. 320, Fed. Cas. No. 
10,223. In the case of Allen v. Thompson, 10 Fed. 116, an 
application to vacate the certificate of discharge for want of 
jurisdiction, because one of the members of the firm did not 
reside, nor did the firm do business, within the district, was 



92 , BANKRUPTS. (Ch. 3 

denied. Jurisdictional facts will be presumed in favor of the 
jurisdiction. Costs may be awarded to the prevailing party 
in a proceeding to annul a discharge under this provision of the 
law. In re Holgate, 8 Ben. 355, Fed. Gas. No. 6,601. 

Knowledge of Creditors. 

A discharge in bankruptcy not being voidable for causes 
previously known to the creditor, no order to take testimony 
should be made upon a petition to vacate the discharge unless 
the petition shows aflflrmatively reasonable cause to believe 
that the creditor was ignorant of the ground specitied when the 
discharge was granted. In re Bates, 27 Fed. 604. A dis- 
charge will not be set aside when the fraudulent acts relied 
upon by the petitioning creditors to annul it were suspected 
and believed to exist before the discharge, and when the after- 
discovered evidence is incompetent and inadmissible. Marion- 
neaux's Case, 1 Woods, 37, Fed. Gas. No. 9,088. Where speci- 
fications in opposition to a discharge were filed by certain cred- 
itors, and, after pending in court for a year, were withdrawn, 
and the bankrupt discharged, another creditor, who was repre- 
sented in the bankruptcy proceedings by the same solicitor 
who acted for the objecting creditors, will not be heard to 
assert personal ignorance before the granting of the discharge 
of the matters contained in said specifications, nor permitted 
to set them up as grounds for avoiding the discharge. In re 
Douglass, 11 Fed. 403. 

Limitation as to Time. 

The period of one year within which a petition to vacate the 
discharge of a bankrupt for fraud must be filed, begins to run 
from the date of the discharge, and not from the discovery of 
the fraud. Mall v. Ullrich, 37 Fed. 653. An^application for 
leave to contest the validity of a discharge cannot be amended, 
after the expiration of two years from the date of the discharge, 
by adding another of the acts mentioned in the statute as cause 
for withholding a discharge, to those already specified in the 



§ 15} DISCHARGES, WHEN REVOKED. 93- 

application. In re Sims, 9 Fed. 440. In a case where the 
interest of the creditors who petitioned for a review of the dis- 
charge was small in comparison with the aggregate of debts, 
and the bankrupt had resumed his business on the faith of the 
discharge, and entered into extensive contracts, it was held 
that five months was too unreasonable a delay on the part of 
the creditors, no sufficient excuse being offered, and the petition 
must be dismissed. In re Murray, 14 Blatchf. 43, Fed. Gas. 
No. 9,953. Where a discharge was inadvertently granted to- 
a bankrupt, although there were specifications of opposition on 
file, and no ruling or trial was ever had on such specifications, 
and the bankrupt, on the faith of his discharge, had borrowed 
money and resumed business, and the creditor who filed the 
specifications moved to vacate the discharge, but after such a 
lapse of time as to make him guilty of laches, it was held that 
the motion must be denied. In re Buchstein, 9 Beil. 215, Fed. 
Cas. No. 2,076. 

Grounds for RevoMng Discharge. 

A bankrupt's discharge will be set aside and annulled for 
fraud practiced in obtaining it. In re Augenstein, 2 MacAr- 
thur, 322. The provision of the act relating to the annulling^ 
of a discharge does not authorize a rehearing or new trial upon 
specifications already filed in opposition to the discharge and. 
which were heard and determined before the discharge, even 
if the opposing creditor can adduce new facts, happening since 
the discharge, which would be competent evidence if a new 
trial were authorized by the statute. In re Corwin, 1 Fed.. 
847. 

Buying Assent of Creditors. 

Where one of the creditors, knowing facts sufficient to bar 
the bankrupt's discharge, is about to file opposition thereto, 
and the bankrupt, with knowledge thereof, pays money to such 
creditor to induce him to forbear opposing the discharge, the- 
discharge, when granted, is invalid and may be impeached oa 



94 BANKRUPTS. (Ch. 3 

these grounds. Coates v. Blush, 1 Cush. 564. So where the 
bankrupt's wife executes a note and mortgage on her separate 
property, at his request, in pursuance of an agreement by which 
he was to pay the debt of his creditor in full if the latter would 
assent to his discharge, the securities are without consideration 
and are tainted with the illegality of the transaction, notwith- 
standing they were executed after the discharge, and although 
the wife did not know of the agreement. Blasdel v. Fowle, 
120 Mass. 447. But the rule does not apply to the payment by 
the bankrupt of the fees of attorney, notary, and register in 
making proof of claims against his estate, though his sole mo- 
tire in doing so was to obtain the consent of creditors to his 
•discharge. In re Svenson, 9 Biss. 69, Fed. Cas. No. 13,659. 
And where a surety of the bankrupt paid the debt of a creditor 
who was opposing the bankrupt's discharge, merely for his own 
purposes, and without consulting with the bankrupt or inform- 
ing him of the transaction until long afterwards, and the latter 
had no part in it, nor made any promise to repay the amount, 
it was held that this would not vitiate his discharge. Ex parte 
Briggs, 2 Low. 389, Fed. Cas. No. 1,868. If the assent of a 
creditor to the discharge was corruptly procured, and this is 
assigned as a ground for annulling the same, it is no answer to 
say that itie assent of that creditor was altogether unnecessary. 
In re Douglass, 11 Fed.. 403. 

CO-DEBTORS OF BANKRUPTS. 

§ 16. a The liability of a person who is a co- 
^Sebtor -with, or guarantor or in any manner a 
surety for, a bankrupt shall not be altered by the 
discharge of such bankrupt. 



:§ 17) DEBTS NOT AFFECTED BY A DISCHARGE. 95 

DEBTS NOT APrECTED BY A DISCHARGE. 

§ 17. a A discharge in bankruptcy shall release 
a bankrupt from all of his provable debts, except 
Buch as (1) are due as a tax levied by the United 
States, the state, county, district, or municipality 
in -which he resides ; (2) are judgments in actions 
for frauds, or obtaining property by false pretenses 
or false representations, or for willful and malicious 
injuries to the person or property of another ; (3) 
have not been duly scheduled in time for proof 
and allowance, w^ith the name of the creditor if 
known to the bankrupt, unless such creditor had 
notice or actual knowledge of the proceedings in 
bankruptcy ; or (4) w^ere created by his fraud, em- 
bezzlement, misappropriation, or defalcation w^hile 
acting as an officer or in any fiduciary capacity. 

Debts due the Sovereign. 

Under the English bankruptcy laws, a discharge will not re- 
lease the debtor from a debt due the crown ; because the king 
is not expressly named in the clauses relating to discharge of 
debts, and it is familiar law that he is not bound by any statute 
unless specifically mentioned therein; see 1 Deac. Bankr. 
p. 784; Rex v. Pixley, Bunb. 202; Ex parte Russell, 19 Ves. 
165. Upon the same principle, and for the same reason, it was 
held, both under the bankrupt act of 1800 and that of 1867, 
that debts due from the bankrupt to the United States, of any 
•character or description, were not released or affected by his 
discharge. U. S. v. Herron, 20 Wall. 251; U. S. v. The Rob 
Roy, 1 Woods, 42, Fed. Cas. No. 16,179; Smith v. Hodson, 50 
Wis. 279, 6 N. W. 812; U S. v. King, Wall. Sr. 13, Fed. Cas. 
No. 15,536. And by an analogous course of reasoning the 
conclusion was reached that debts due to a state would not be 



96 BANKRUPTS. (Ch. 3 

affected or discharged. Saunders v. Com., 10 Grat. 494; 
■State V. Shelton, 47 Conn. 400; Johnson v. Auditor, 78 Ky. 
282; Spalding v. New York, 4 How. 21. But it wiU be ob- 
served that this is entirely changed by the language of the 
present statute, and all debts to a state or the United States, 
except only taxes, will be released by a discharge duly 
granted. 

Debts Created Jyy Debtor's Fraud or Enibezzlement. 

The word "fraud," in this connection, means positive fraud 
or fraud in fact, involving moral turpitude or intentional 
wrong, and not implied fraud or fraud in law, which may exist 
without the imputation of bad faith or immorality. Neal v. 
Clark, 95 U. S. 704; Allen v. Hickling, 11 111. App. 549. And 
the debt must be tainted with fraud in its inception; for if the 
contract was fair and honest when made, although the debtor 
may subsequently be guilty of fraudulent conduct in respect to 
it, yet such conduct will not destroy the benefit of his dis- 
charge. Brown v. Broach, 52. Miss. 536. The recovery of 
judgment upon a contract induced by a fraud is a waiver of 
the fraud, and the judgment is not a debt created by fraud so 
as not to be released by a discharge in bankruptcy. Palmer 
v. Preston, 45 Vt. 154; per contra, Warner v. Cronkhite, 6 
Biss. 453, Fed. Gas. No. 17,180; D6nald v. Kell, 111 Ind. 1, 
11 N. E. 782. A debt created by fraud is not barred by the 
bankrupt's discharge even where it was proved against his 
estate and a dividend received on account. Strang v. Bradner, 
114 U. S. 555, 5 Sup. Ct. 1038. An action on the case for de- 
ceit is not barred by a discharge in bankruptcy, though the 
measure of damages was ascertainable by reference to a con- 
tract. Hughes V. Oliver, 8 Pa. St. 426. And the joinder, 
to a count in tort for deceit, of a count in contract for the same 
cause of action, does not make a discharge in bankruptcy a 
defense to the count in tort. Morse v. Hutchins, 102 Mass. 
439. A discharge in bankruptcy does not release a husband 
from the obligation to pay alimony decreed by a state court. 



§ 17) DEBTS NOT AFFECTED BY A DISCHARGE. 97 

In re Garrett, 2 Hughes, 235, Fed. Cas. No. 5,252. If the 
debtor buys goods for cash on delivery, and obtains possession 
of them without payment, and immediately ships them be- 
yond the reach of the seller, and then refuses to pay, his con- 
duct is such as to make the debt a fraudulent one within the 
meaning of the bankrupt law. Classen v. Schoenemann, 80 
111. 304; Ames v. Moir, 130 111. 582, 22 N. E. 535. 

Embezzlement, 

Embezzlement has beten defined as follows : "The fraudu- 
lent removing and secreting of personal property with 
which the party has been intrusted, for the purpose of ap- 
plying it to his own use." Bouvier, Law Diet. "Embezzle- 
ment is a crime unknown to the common law, but depends 
entirely upon statutory enactments, is a sort of statutory 
larceny, and may be defined as a fraudulent appropriation 
to one's own use of the money or goods of another, which 
were intrusted to his care as servant, bailee, or otherwise." 
6 Am. & Eng. Enc. Law, p. 451. "When a clerk, servant, 
agent, or public officer commits theft by converting to his 
own use any chattel, money, or valuable security received 
or taken into possession by him for or in the name or on 
account of his master, principal, or employer, his offense 
is called embezzlement." Papal. & L., Law Diet. For 
further information as to the nattlre and definition of em- 
bezzlement, and the application of the term to particular 
acts and relations, the following authorities may be con- 
sulted: State v. Wolff, 34 La. Ann. 1153; Chaplin v. Lee, 
18 Neb. 440, 25 N. W. 609; State v. Baumhager, 28 Minn. 
226, 9 N. W. 704; Reg. v. Rogers, 3 Q. B. Div. 28; Sawin 
V. Martin, 11 Allen, 439; People v. Burr, 41 How. Prac. 
293; Fagnan v. Knox, 40 N. Y. Super. Ct. 41, 49; Com. v. 
King, 9 Cush. 284; Reed v. Bank of Newburgh, 6 Paige, 
337; Ex parte Hedley, 31 Cal. 108; People v. McKinney, 
10 Mich. 54; Com. v. Tuckerman, 10 Gray, 173; 2 Bish. 
Cr. Law, §§ 325-330. 
BL. BANK.— 7 



98 BANKRUPTS. C^h. 3 

Fiduciary Debts. 

The "fiduciary capacity" intended by the bankrupt law 
relates to ca^es of technical trusts; not merely such as the 
law implies from the contract, but actual and expressly 
constituted; and in like manner the "fraud" intended is 
an actual or express fraud as distinguished from an implied 
or constructive fraud founded merely upon some breach 
of duty. Palmer v. Hussey, 87 N. Y. 303. A sum of money 
to which a wife was entitled on the sale of certain real 
estate in partition proceedings was decreed to be paid to 
Ijer husband, he to apply the interest to his own use, and 
give bonds for the payment of the principal sum at his 
death or whenever so required by the court. It was he^.d, 
in an action to recover such principal sum, that the lia- 
bility incurred by the husband was incurred while acting 
in a fiduciary capacity, and was not discharged by pro- 
ceedings in bankruptcy. Mock v. Howell, 101 N. C. 443, 
8 S. E. 167. But a balance due on the bankrupt's subscrip- 
tion to the capital stock of a corporation is not a fiduciary 
debt. Morrison v. Savage, 56 Md. 142. 

Factors. 

The question whether or not the liability of a factor or 
commission merchant for money belonging to his principal, 
but which he has wrongly converted to his own use, is a 
debt created by him while acting in a "fiduciary capacity," 
has been a fruitful source of discussion and has resulted 
in an almost hopeless conflict of authorities. The leading 
case on the subject is Chapman v. Forsyth, 2 How. 202, 
where McLean, J., said "If the act embrace such a debt, 
it will be difficult to limit its application. It must include 
all debts arising from agencies, and indeed all cases where 
the law implies an obligation from the trust reposed in the 
debtor. Such a construction would have left but few debts 
on which the law could operate. In almost all the com- 
mercial transactions of the country, confidence is reposed 



§ 17) DEBTS NOT AFFECTED BY A DISCHARGE. 99 

in the punctuality and integrity of the debtor, and a viola- 
tion of these is, in a commercial sense, a disregard of a 
trust. But this is not the relation spoken of in the act." 
This decision has been followed in numerous cases; Zeper- 
ink V. Card, 3 McCrary, 549, 11 Fed. 295; Owsley v. Oobin, 
15 N. B. E. 489, Fed. Cas. No. 10,636 (by Waite, C. J.); In 
Ee Smith, 9 Ben. 494, Fed. Cas. No. 12,976 (citing Neal v. 
Clark, 95 U. S. 708); Hayman t. Pond, 7 Mete. (Mass.) 328; 
Scott y. Porter, 93 Pa. St. 38; Falkland v. Bank, 21 Hun, 
450; Austin v. Crawford, 7 Ala. 335; ' Woolsey v. Cade, 54 
Ala. 378; Georgia Eailroad v. Cubbedge, 75 Ga. 321 (over- 
ruling Jones V. Eussell, 44 Ca. 460) ; Maxwell v. Evans, 90 
Ind. 596; Du Pont v. Beck, 81 Ind. 271. On the other 
hand, many respectable authorities hold that a factor is 
one who "acts in a fiduciary character," and that his lia- 
bility to his principal will not be released by his discharge 
in bankruptcy. In Ee Kimball, 6 Blatchf. 292, Fed. Cas. 
No. 7,769; Hardenb?ook v. Colson, 61 How. Prac. 426; 
Whitaker v. Chapman, 3 Lans. 155; Banning v. Bleakley, 
37 La. Ann. 257; Treadwell v. Holloway, 46 Cal. 547; 
Lemcke v. Booth, 47 Mo. 385; Brunswig v. Taylor, 2 Mo. 
App. 351. Upon the whole, we must conclude that the 
rule announced in Chapman v. Forsyth (that a factor is 
not a fiduciary) is the true doctrine on the subject, and 
supported by the preponderance of authority. See an article 
on this subject in 7 Am. Law Eev. 32. 

bailees. 

Where one receives the money or property of another as 
ugent or bailee, the title to which is to remain in the prin- 
cipal, and which is to be paid over or delivered to him, 
or to be used in a particular way or for a specific purpose 
for his use, then the money or property is received or held 
in a fiduciary capacity, or as trustee. Matteson v. Kellogg, 
15 111. 547. So where grain is stored with a warehouse- 
man, to be returned in kind but not necessarily the identical 



-1 



100 BANKRUPTS. (Ch. 3 

grain, he does not hold it in a fiduciary capacity. Sum- 
ner V. Kichie, 54 Iowa, 554, 6 N. W. 752. An agent (not a 
factor) who retains money of his principal sent to him for 
a special purpose, is not a fiduciary debtor; this is not a 
technical trust. Pankey t. Nolan, 6 Humph. 154. So 
where the bankrupt is under a debt or obligation arising 
from his appropriating to his own use collateral securities 
deposited with him as security for the payment of money 
or the performance of a duty, and his failure or refusal to 
return the same after the money has been paid or the 
duty performed, such debt is not created by fraud nor in 
a fiduciary character in the sense of the bankrupt law. 
Hennequin v. Clews, 111 U. S. 676, 4 Sup. Ct. 576, afiftrm- 
ing S. C. 77 N. Y. 427. 

Collecting Agents. 

Where the debtor has been employed to collect moneys 
for the creditor, and the understanding of the parties is 
such that the debtor may mingle the funds so collected 
with his own money without being thereby guilty of a 
breach of trust, and that he is merely to account for the 
aggregate of collections for a given period, his failure to 
pay over the funds does not constitute a debt created in a 
fiduciary character. Guilfoyle v. Anderson, 9 Daly, 64; 
Kaufman v. Alexander, 53 Tex. 562; Grover & Baker Sew- 
ing Mach. Co. V. Clinton, 5 Biss. 324, Fed. Cas. No. 5,845. 
So it has been held that where the collecting agent of a 
bank converts to his own use the proceeds of notes and 
drafts sent to him for collection by the bank, his liability 
therefor is not a fiduciary debt. Green v. Chilton, 57 Miss. 
598. But compare Fulton v. Hammond, 11 Fed. 291. In 
a case where it appeared that A., for his own accommoda- 
tion, asked B. to collect money for him, without compensa- 
tion, and to keep it until A. called for it, and B. collected 
the money, and without actual fraud or fraudulent in- 
tent deposited the proceeds to his own credit with his own 



§ 17) DEBTS NOT AFFECTED BY A DISCHARGE. 101 

funds, and by unexpected reverses he was forced into bank- 
ruptcy before he had paid it over, and made a composition 
with his creditors, it was held that the debt thus incurred 
by B. to A. was not a debt created by the fraud or em- 
bezzlement of the bankrupt, or while he was acting in a 
fiduciary capacity. Noble v. Hammond, 129 U. S. 65, 9 
Sup. Ct. 235. 

Attorneys. 

The relation of attorney and client is one of trust, and 
a violation of duty by the attorney (as a failure to pay o,ver 
money collected for the client) is done in a fiduciary capacity 
under the bankrupt law. Flanagan v. Pearson, 42 Tex. 
1; White v. Piatt, 5 Denio, 274; Heffren v. Jayne, 39 Ind. 
463; contra, Wolcott v. Hodge, 15 Gray, 547. But a debt 
created by a person while acting as an attorney in fact 
is not of this character. Woodward v. Towne, 127 M£|,ss. 
41. 

Pvhlic Officers. 

A collector of city taxes is a public officer, and a debt 
which he owes to the city in consequence of a defalcation 
in his office of collector is a fiduciary debt and will not be 
released by his discharge in bankruptcy. Morse v. Lowell, 
7 Mete. (Mass.) 152; Richmond v. Brown, 66 Me. 373. But 
the surety on the official bond of a defaulting constable 
is entitled to be released, by his discharge in bankruptcy, 
from his liability for the breach of such bond. McMinn 
V. Allen, 67 N. C. 131. Where a retiring township trustee 
gives a note to his successor, 'in satisfaction of a debt due 
the township, for funds wrongfully appropriated to his 
own use, the fiduciary character of the debt is not changed, 
so as to bring it within the effect of a discharge in bank- 
ruptcy. Madison Tp. v. Dunkle, 114 Ind. 262, 16 N. E. 593. 
On the other hand, where claims are placed in the hands 
of a public officer for collection, his liability for negligence 



102 BANKRUPTS. (Ch. 3 

merely in failing to use due diligence in collecting and pay- 
ing over the money is not a "defalcation," within the mean- 
ing of the bankrupt law. Courtney v. Beale, 84 Va. 692, 
5 S. E. 708. 

JExecutors cmd Administrators. 

A sum of money due from an executor to the residuary 
legatee under the will, as such, is a fiduciary debt. Cris- 
fleld V. State, 55 Md. 192. But an agreement by an ex- 
ecutor, guaranteeing the payment of a demand against the 
estate, and admitting the possession of suflftcient assets, 
is not. Amoskeag Co. t. Barnes, 49 N. H. 312. So where 
an administrator settles up the estate and gives his indi- 
vidual note to the distributees for the balance due, this is 
not a fiduciary debt. Elliott v. Higgins, 83 N. C. 459. 

Sureties on Bonds. 

The liability of a surety on a guardian's bond is not a 
fiduciary debt. "The surety merely guarantees the acts of 
his principal. No trust or confidence is reposed in him. 
He has nothing to do with the person or property of the 
ward, and has no control over the condiact of the guardian. 
He is liable simply on his contract and according to its 
terms." Eeitz v. People, 72 111. 435; McDonald v. State, 
77 Ind. 26; Jones v. Knox, 46 Ala. 53. So a debt due by a 
guardian to his ward in respect of the latter's property is 
a fiduciary debt; but if the guardian's surety pays it to 
the ward, and then sues the guardian, this is a debt which 
will be released by the guardian's discharge in bankruptcy; 
for the relation of the guardian and surety is that of simple 
contract. Cromer v. Cromer, 29 Grat. 280; though see 
Light V. Merriam, 132 Mass. 283. The liability of a surety 
on an administrator's bond for the default of his principal 
is not a fiduciary debt. Steele v. Graves, 68 Ala. 21. 



§ 17) DEBTS NOT AFFECTED BY A DISCHARGE. 103 

Trust-Funds. 

Where A. owes B. a debt, and makes an assignment of 
property, and gives a judgment, to C, in trust to pay such 
debt to B., such property constitutes, in equity, a trust- 
fund in the hands of C, and if B, recovers a judgment 
against him for the amount so received to B.'s use, this is a 
fiduciary debt. Kingsland v. Spalding, 3 Barb. Ch. 341. In the 
case of Herman v. Lynch, 26 Kan. 435, it appeared that the 
defendant received certain money from the plaintiff for the 
purpose and under an agreement that he should take the money 
to a designated town and there purchase exchange with it and 
remit the same to a creditor of the plaintiff; defendant ap- 
propriated the money to his own use; it was held that he 
received and held it in a fiduciary capacity. But in Phillips 
v. Eussell, 42 Me. 360, on an almost identical state of facts, 
an opposite view was held. 

Atictioneers. 

An auctioneer acts in a fiduciary character in respect to 
goods placed in his hands for sale, and his liability for their 
proceeds will not be released by his discharge in bankruptcy. 
Jones V. Russell, 44 Ga. 460; In Re Lord, 5 Law Rep. 258; 
contra, Gibson v. Gorman, 44 N. J. Law, 325. 

Mights of Fiduciary Creditor. 

"The fiduciary creditor stands on the^ame footing with other 
creditors, except that he is unaffected by the discharge. He 
may prove his debt and share in the distribution, but has ho 
exclusive or superior advantages in the assets over other cred- 
itors." Winters v. Glaitor, 54 Miss. 349. 

Revival of Debt Barred hy Discharge; — N'ew Promise. 

While the effect of a discharge in bankruptcy is to suspend 
the right of action against the debtor, upon all provable debts 
not falling within the excepted classes, yet the debt remains, 
and the moral obligation to pay it forms a sufQcient consider- 



104 BANKRUPTS. _ (Ch. 3 

ation for a new promise to make such payment; and such 
promise, if distinct and specific, need not be in writing but 
may be proved by parol. Worthington v. De Bardlekin, 
33 Ark. 651; Apperson v. Stewart, 27 Ark. 619; Barron v. 
Benedict, 44 Vt. 518; Craig v. Seitz, 63 Mich. 727, 30 N. W. 
347; Wislizenus v. O'Fallon, 91 Mo. 184, 3 S. W. 837. But 
nothing is sufficient to revive a discharged debt unless the 
jury are authorized by it to say that there is the expression 
by the debtor of a clear intention to bind himself to the pay- 
ment of the debt, and the rule is more stringent than in re- 
gard, to the revival of a debt barred by the statute of limita- 
tions. Allen V. Ferguson, 18 Wall. 1. Nothing amounts to 
a new promise to avoid the eifect of the discharge that is not 
intended distinctly as a recognition and renewal of the debt 
as binding. Brewer v. Boynton, 71 Mich. 254, 39 N. W. 49 ; 
Craig V. Seitz, 63 Mich. 727, 30 N. W. 345; Murphy v. Craw- 
ford, 114 Pa. St. 496, 7 Atl. 142. Where a bankrupt, after 
his discharge, confesses judgment upon an old debt, the debt 
is a good consideration for the judgment, and the latter is not 
affected by the discharge. Dewey v. Moyer, 72 N. Y. 70. 
The majority of the cases hold that when the bankrupt has 
given a new promise sufficient to revive a debt barred by his 
discharge in bankruptcy, the creditor, in bringing suit for 
the recovery of the debt, must declare on the original obliga- 
tion or engagement, and not on the new promise. Marshall 
V. Tray, 74 111. 379; Apperson v. Stewart, 27 Ark. 619; 
Badger v. Gilmore, 33 N. H. 361; Fraley v. Kelly, 67 K C. 78; 
Eiggs V. Eoberts, 85 N. C. 151; Clark v. Atkinson, 2 E. D. 
Smith, 112; Dusenberry v. Hoyt, 53 N. Y. 521. But still 
the opposite view — that the original debt is absolutely extin- 
guished by the discharge, and the only cause of action is on 
the new promise — is supported by several decisions, and 
notably in Pennsylvania. Bolton v. King, 105 Pa. St. 78; 
Hobough V. Murphy, 114 Pa. St. 358, 7 Atl. 139; Murphy v. 
Crawford, 114 Pa. St. 496, 7 Atl. 142; Ross v. Jordan, 62 



§ 17) DEBTS NOT AFFECTED BY A DISCHARGE. 105 

Ga. 298; Fleming v. LuUman, 11 Mo. App. 104; Eckler v. 
Galbraith, 12 Bush, 71. A discharge in bankruptcy relates 
back to the adjudication of the fact of bankruptcy; and a 
subsequent promise to pay a debt is not required to be made 
after the discharge, but is sufficient if made between the 
adjudication and the discharge. Griel t. Solomon, 82 Ala. 
85, 2 South. 322; Wheeler v. Wheeler, 28 111. App. 385. But 
the original debt is revived only as of the date of the new 
promise, and where judgment is obtained upon the latter, the 
debtor is entitled to claim the exemption provided by the law 
in force at the latter date. Willis v. Cushman, 115. Ind. 100, 
17 N. E. 168. 



106 COURTS ANB PROCEDURE THEREIN. (Ch. 4 

CHAPTER rV. 

COURTS AND PKOCEDUBE THEREIN. 
PROCESS, PLEADINGS, A.ND ADJUDICATIONS. 

§ 18. a Upon the filing of a petition for involun- 
tary* bankruptcy, service thereof, -with a -writ of 
subpoena, shall be made upon the person therein 
named as defendant in the same manner that serv- 
ice of such process is now had upon the commence- 
ment of a suit in equity in the courts of the United 
States, except that it shall be returnable ■within fif- 
teen days, unless the judge shall for cause fix a 
longer time,'; but in case personal service can not 
be made, then notice shall be given by publication 
in the same manner and for the same time as pro- 
vided by la-wr for notice by publication in suits in 
equity in courts of the United States. 

b The bankrupt, or any creditor, may appear and 
plead to the petition -vrithin ten days after the re- 
turn day, or within such further time as the court 
may allow. 

c All pleadings setting up matters of fact shall be 
verified under oath. 

d If the bankrupt, or any of his creditors, shall 
appear, within the time limited, and controvert the 
facts alleged in the petition, the judge shall deter- 
mine, as soon as may be, the issues presented by 
the pleadings, without the intervention of a jury, 
except in cases where a jury trial is given by this 
act, and makes the adjudication or dismiss the peti- 
tion. 



§ 18) PROCESS, PLEADINGS, AND ADJUDICATIONS. 107 

e If on the last day 'within ■which pleadings may 
be filed none are filed by the bankrupt or any of 
his creditors, the judge shall on the next day, if 
present, or as soon thereafter as practicable, make 
the adjudicatidli or dismiss the petition. 

/ If the judge is absent from the district, or the 
division of the district in which the petition is 
pending, on the next day after the last day on 
■which pleadings may be filed, and none have been 
filed by the bankrupt or any of his creditors, the 
clerk shall forthwith refer the case to the referee. 

g Upon the filing of a voluntary petition the judge 
shall hear the petition and make the adjudication 
or dismiss the petition. If the judge is absent from 
the district, or the division of the district in ■which 
the petition is filed at the time of the filing, the 
clerk shall forth^with refer the case to the referee. 

PROCEEDINGS IN BANKRUPTCY; ADJUDICATION. 

Service of Process. 

The thirteenth equity rule provides that "the service of all 
subpoenas shall be by a delivery of a copy thereof by the 
offlcer serving the same to the defendant personally, or by 
leaving a copy thereof at the dwelling-house or usual place 
of abode of each defendant, with some adult person who is 
a member or resident in the family." And the fifteenth rule 
provides that "the service of all process, mesne and final, 
shall be by the marshal of the district, or his deputy, or by 
some other person specially appointed by the court for that 
purpose, and not otherwise. In the latter case, the person 
serving the process shall make aflSdavit thereof." The gen- 
eral appearance of a party to a suit in personam waives all 
irregularities in the service of the process and confers juris- 
diction so far as the person is concerned. Such jurisdiction, 



108 COURTS AND PROCEDURE THEREIN. (Ch. 4 

when once conferred, cannot be withdrawn by the act of the 
party who has so appeared, without the consent of the court 
or of the prosecuting party. In re Ulrich, 3 Ben. 355, Fed. 
Cas. No. 14,327. 

Objections to Jurisdiction. 

The creditors, when notified that proceedings in bank- 
ruptcy have been commenced, must promptly, by motion or 
petition, raise any objections they may have to the jurisdic- 
tion of the court; if they fail to do so, the objections will be 
waived. They cannot for the first time object to the juris- 
diction in opposition to the application for discharge. Al- 
len T. Thompson, 10 Fed. 116. On the other hand, it is 
held that an appearance and answer do not waive any ques- 
tion affecting the jurisdiction of the court, for no voluntary 
act of the defendant can give jurisdiction; and it is never too 
late, at any stage of the cause, to consider it. Jobbing v. 
Montague, 6 N. B. E. 509, Fed. Cas. No. 7,330. The proceed- 
ings in a court of bankruptcy cannot be attacked collaterally 
upon questions of jurisdiction. Adams v. Terrell, 4 Fed. 796. 
A voluntary petition in bankruptcy by a debtor may be re- 
ceived, notwithstanding the fact that a petition for a com- 
pulsory decree against him has already been filed, and an or- 
der of notice to show cause thereon obtained by a creditor 
against him, if there has been no adjudication. In re Can- 
field, 1 N. Y. Leg. Obs. 234, Fed. Cas. No. 2,380. 

Requisites of the Petition. 

The specific acts of bankruptcy relied upon by the petition- 
ing creditors as justifying an adjudication must be set forth 
in their petition, and the proofs will be confined to the scope 
of the petition ; that is, evidence of other acts of bankruptcy 
than those alleged in the petition will not be received. Ex 
parte Potts, Orabbe, 469, Fed. Cas. No. 11,344. So also, the 
facts concerning an alleged act of bankruptcy should be 



§ 18) PROCESS, PLEADINGS, AND ADJUDICATIONS. 109 

stated in the petition with such certainty and detail as to 
inform the debtor of what he is required to make proof or 
explanation. In re Randall, Deady, 557, Fed. Cas. No. 11,- 
551. Thus, where the petition contained an allegation that 
the respondent owed a debt, but no allegation that it was 
owed to the petitioning creditor, it was held insufflcient. 
In re Western Sav. & T. Co., 4 Sawy. 190, Fed. Gas. No. 17,- 
442. And the nature of the petitioners' debts should be so 
far stated in the petition that the court may see that they 
are provable against the estate. In re Hadley, 12 N. B. K. 
366, Fed. Cas. No. 5,894. In an anonymous case reported in 
15 Pittsb. Leg. J. 81, Fed. Cas. No. 471, permission to file a 
petition in bankruptcy was refused on account of the illegi- 
ble manner in which it was written. And in another case, 
it was stated that if the petition undertakes to name the 
judge to whom it is to be presented, the name given must 
be correctly given; it cannot be stricken out as surplusage; 
and hence if the name is incorrect, permission to file the 
petition will not be granted. Anonymous, 1 N. B. R. 216, 
Fed. Cas. No. 459. 

Yerification of Petition. 

It is sufficient if a petition in involuntary bankruptcy be 
signed and sworn to by an attorney of the petitioning cred- 
itor, duly authorized thereto ; and it is not necessary that it 
should be signed or verified by the petitioning creditor in 
person. In re Eaynor, 11 Blatchf. 43, Fed. Cas. No. 11,507. 
So a voluntary petition in bankruptcy, signed and verified by 
the agent of the debtor, will be sufficient to sustain the juris- 
diction of the bankruptcy court in a collateral proceeding. 
Wald V. Wehl, 6 Fed. 163. And the fact that the petition 
in a voluntary proceeding was signed by an attorney who had 
not, at that time, been admitted to practice in the court in 
which the petition was filed, is not a ground for dismissing 
the proceeding, but merely for an order, on notice to the 



110 COURTS AND PROCEDURE THEREIN. (Ch. 4 

bankrupt and the alleged attorney, that the latter will no 
longer be recognized as attorney in the case. In re O'Hal- 
loran, 8 Ben. 128, Fed. Oas. No. 10,463. Under the act of 
1867, it was held that the verification of a petition in involun- 
tary bankruptcy before a notary public was irregular; but 
the irregularity was a question of practice merely, and not 
of jurisdiction. In re Getchell, 8 Ben. 256, Fed. Cas. No. 
5,371. The failure of a notary to aflSx his notarial seal to 
the verification of a creditor's petition and the proofs of 
debts of such creditorj in a case of involuntary bankruptcy, 
will not defeat the jurisdiction of the court. In re Donnelly, 
5 Fed. 783. And generally, objections to the petition on the 
ground of the insufficiency of its signature and verification 
will be considered as waived, where the bankrupt takes issue 
npon the petition, puts in a denial of its substantive allega- 
tions, and demands a trial by jury. In re McNaughton, 8 
N. B. E. 44, Fed. Cas. No. 8,912. 

Filing a/nd Presenting Petition. 

' A petition in bankruptcy need not be presented to the court 
simultaneously with its verification. The fact that the peti- 
tion was attested nine days before its presentation constitutes 
no bar to its presentation; and the decree dates back to the 
application, so that property acquired after the verification 
of the petition, though before its presentation to the court, 
passes as assets to the assignee. In re Abrahams, 5 Law Rep. 
328, Fed. Cas. No. 20. A petition for adjudication in bank- 
ruptcy is to be deemed "filed," within the meaning of the stat- 
ute, from the time when it is presented to the clerk for the 
action of the court. The time of filing does not date from the 
time when the clerk presents it to the judge for his action as 
to issuing a subpoena or order to show cause. In re Bear, 5 
Fed. 53. 



§ 18) PROCESS, PLEADINGS, AND ADJUDICATIONS. Ill 

Amsridnnent of Petition. 

The court of bankruptcy, on a trial before a jury as to tlie 
iact of bankruptcy, in an involuntary proceeding, has power 
to permit an amendment of the creditors' petition. In re Bin- 
inger, 7 Blatchf. 262, Fed. Cas. No. 1,420. An amendment to 
-a petition in bankruptcy relates back to the time of the filing 
of the original petition, and has the same force and effect as 
though included in the petition itself. Sherman v. Interna- 
tional Bank, 8 Biss. 371, Fed. Cas. No. 12,765. But the court, 
in allowing such amendments, should be governed by substan- 
tially the same principles which apply to similar cases in other 
courts; and hence if the proposed amendments would intro- 
duce into the petition entirely new acts of bankruptcy, and are 
founded upon facts not stated or referred to in the original 
petition, leave to amend should not be granted, unless, per- 
haps, where the debtor consents thereto. Reed v. Cowley, 1 
N. B. E. 516, Fed. Cas. No. 11,644; In re Leonard, 4 N. B. R. 
562, Fed. Cas. No. 8,255. But it has been held that, where 
the proofs disclose acts of bankruptcy not averred in the peti- 
tion of the creditor, the petition may be amended so as to con- 
form to the proofs. In re Gallinger, 1 Sawy. 224, Fed. Cas. 
No. 5,202. And an amendment to the petition, charging that 
the conveyances which were specifically set forth in the peti- 
tion, and which were therein alleged to be fraudulent and 
without consideration, were also made, if there was any con- 
sideration, with intent to prefer certain persons to whom the 
conveyances were made, does not charge a new act of bank- 
ruptcy, and should be allowed. In re Henderson, 9 Fed. 196. 
But it is the design of the law that proceedings in bankruptcy 
■should be summary, and that they should go on without de- 
lay; and where an order to show cause was denied on the day 
the petition was filed, because it appeared on the face thereof 
that the bankrupt did not reside within the jurisdiction of the 
<;ourt, the petitioners cannot, after delaying for nearly a year 
-without sufficient excuse, have the petition amended so as to 



112 COURTS AND PROCEDURE THEREIN. (Ch. 4 

show that the bankrupt did in fact reside within the jurisdic- 
tion. In re Freudenfels, Fed. Cas. No. 5,112a. A creditor 
■who has joined in an involuntary petition cannot afterwards 
object to an amendment thereof which is necessary to the 
prosecution thereof to final effect. In re Sargent, 13 N. B. R. 
144, Fed. Cas. No. 12,361. 

Plea or Answer of Debtor. 

Under the bankruptcy act of 1867, it was doubtful whether 
any answer was necessary in proceedings in involuntary 
bankruptcy to a rule upon a debtor to show cause why he 
should not be adjudged a bankrupt. It was said that a paper 
simply denying the acts of bankruptcy charged, and demand- 
ing a trial by jury, was a proper and sufficient response on 
the part of the debtor to such a rule. Phelps v. Clasen, 
Woolw. 204, Fed. Cas. No. 11,074. And in another case it 
was said that that statute did not require that the answer 
to the creditors' petition, to entitle the debtor to demand and 
have a hearing by the court or a trial by jury, should be veri- 
fied or even in writing. It was held to be suflScient if he ap- 
peared before the court and alleged that the facts set forth 
were not true. But, at the same time, it was said to be the 
better practice to put the whole answer in writing, and allege 
in express terms that the facts set forth in the petition are 
not true, and then conclude with a demand for a hearing by 
ihe court or a trial by jury; and this answer should be signed 
by the respondent in nerson or by attorney. In re Heydette, 
8 N. B. R. 332, Fed. Cas. No. 6,444. The present statute, 
while it does not expressly require a written plea or answer 
by the respondent, evidently contemplates a formal answer or 
traverse of the petition. For it declai'es that the bankrupt 
"may appear and plead to the petition ;" that "all pleadings 
setting up matters of fact shall be verified under oath;" that 
the pleadings shall be "filed;" and that the bankrupt may 
have a trial by jury "upon filing a written application therefor 



§ 18) PROCESS, PLEADINGS, AND ADJUDICATIONS. 113 

at or before the time within which an answer may be filed." 
In proceedings in involuntary bankruptcy, no replication is 
necessary to the denial by the debtor of the allegations of the 
petition, for such denial amounts to the general issue. In re 
Dunham, 2 Ben. 488, Fed. Cas. No. 4,143. 

Defenses to Petition in Involuntary Proceedings. 

In a proceeding in involuntary bankruptcy, the alleged! 
debtor may deny that the petitioner for an adjudication is 
his creditor, and if he maintains such denial by proof, he may 
have the petition dismissed. In re Cornwall, 9 Blatchf. 114,. 
Fed. Cas. No. 3,250. The general rule of pleading being that 
answers must be specific, and the true object of pleading in 
any case being to narrow the controversy to the point really 
in dispute, no greater latitude ought to be allowed the defense 
in bankruptcy in this respect than in ordinary actions and 
suits. In re Sutherland, Deady, 344, Fed. Cas. No. 13,638; 
In re Findlay, 5 Biss. 480, Fed. Cas. No. 4,789. A mere gen- 
eral denial of the intent with which an act is alleged to have 
been done is not a good defense to a charge of having com- ' 
mitted an act of bankruptcy; the respondent must also allege 
and prove the actual intent with which he did the act men- 
tioned. In re Silverman, 1 Sawy. 410, Fed. Cas. No. 12,855. 
Where the debtor denies that the requisite number and 
amount of creditors have joined in the petition against him, 
and presents a list of his creditors in support of his denial, it 
seems that such list should be sworn to. In re Steinman, & 
Biss. 166, Fed. Cas. No. 13,357. 

Tender omd Payment. 

Under no circumstances can a plea of tender be a good de- 
fense to a petition for adjudication in bankruptcy. For if 
the debtor is insolvent, he would have no right to offer pay- 
ment, nor the creditor to accept it, as it would amount to a 

preference; and if he is not insolvent, or has not committed 
BL. BANK.— 8 



114 COURTS AND PROCEDURE THEREIN. (Ch. 4 

an act of bankruptcy, that is the question to be determined, 
and the plea of tender is entirely outside the controversy and 
extraneous to the issue. In re Ouimette, 1 Sawy. 47, Fed. 
Oas. No. 10,622; In re Williams, 1 Lowell, 406, Fed. Cas. No. 
17,703. Payments made to petitioning creditors, after the 
petition, and before the trial on an issue raised by a denial 
of bankruptcy, are material facts on such trial, and if such 
payments are shown to an amount suflBcient to reduce the in- 
debtedness of the alleged bankrupt below the minimum estab- 
lished by the act, the court loses jurisdiction to adjudge the 
debtor a bankrupt; the receipt of such payments, to that 
amount, by the petitioning creditors must be considered a 
waiver of the alleged act of banki'uptcy. In re SkeUey, 3 Biss. 
260, Fed. Cas. No. 12,921. 

Burden of Proof . 

In some cases arising under the bankruptcy act of 1867, it 
was held that, by the express terms of the law, the burden 
was upon the debtor to prove to the satisfaction of the court 
that the facts set forth in the petition filed against him for 
an adjudication of bankruptcy were not true, and that, unless 
he did so, the petitioner was entitled to an adjudication. In 
re Price, 8 N. B. E. 514, Fed. Cas. No. 11,411. But other cases 
took the more reasonable view that, although the letter of the 
statute might seem to throw the burden of proof upon the 
debtor, yet the creditors ought to be compelled to make out 
their case as in any other issue ; and that the burden was on 
them to establish the indebtedness of the respondent and the 
alleged acts of bankruptcy. Brock v. Hoppock, 2 N. B. R. 7, 
Fed. Cas. No. 1,912; In re Oregon Bulletin Co., 13 N. B. R. 
,503, Fed. Cas. No. 10,559. But see section 3 of the present 
act, as to cases in which the burden of proving his solvency 
is cast on the debtor. 



§ 18) PROCESS, PLEADINGS, AND ADJUDICATIONS. 115 

Who May Oppose the Adjudication. 

A voluntary petition in bankruptcy may be opposed by cred- 
itors, and will be defeated if they can show that the petitioner 
is not entitled to the benefit of the act, or that he is attempt- 
ing to defraud them. Thus, the adjudication will be refused 
if creditors show that the petitioner had property at the time 
of his application which he knowingly and intentionally omit- 
ted to state in his inventory. In re Bailey, 1 N. Y. Leg. Obs. 
18, Fed. Cas. No. 726. In an involuntary proceeding, any per- 
son who is able to satisfy the court that he is a creditor of 
the respondent and has an interest to protect, and that his 
purpose is a meritorious one, and not purely officious, should 
be allowed to come in and oppose the adjudication. In re 
Boston, H. & E. E. Co., 9 Blatchf. 101, Fed. Cas. No. 1,677; 
In re Jack, 13 N. B. E. 296, Fed. Cas. No. 7,119. So, an at- 
taching creditor, though not originally a party to the proceed- 
ings, has a right to appear and contest the adjudication on 
the ground that the requisite number of creditors have not 
joined (In re Hatje, 6 Biss. 436, Fed. Cas. No. 6,215), or on the 
ground of fraud and collusion between the petitioner and the 
debtor. In re Mendelsohn, 3 Sawy. 342, Fed. Cas. No. 9,420; 
In re Scraflford, 14 N. B. R 184, Fed. Cas. No. 12,557; In re 
Jack, 13 N. B. E. 296, Fed. Cas. No. 7,119. 

Discontinuance and Dimiissal of Proceedings. 

When the court is satisfied that a petition in involuntary 
bankruptcy was not presented in good faith, but for sinister, 
oppressive, and vexatious purposes, it has power to dismiss 
the proceedings. In re Hamlin, 8 Biss. 122, Fed. Cas. No. 5,- 
994. Such is also the practice of the English courts. See Ex 
parte Harcourt, 2 Ebse, 203; Ex parte Ashworth, L. E. 18 
Eq. 705; In re Davies, 3 Ch. Div. 461; Ex parte Bourne, 2 
Glyn & J. 137. If the petition in involuntary proceedings 
was presented by a single creditor, and he desires to discon- 
tinue the proceeding and have his petition dismissed, he may 



116 COURTS AND PROCEDURE THEREIN. (Ch. 4 

do SO before the adjudication, without giving notice to other 
creditors of the alleged bankrupt. In re Camden EoUing- 
Mill Co., 3 N. B. K. 590, Fed. Cas. No. 2,338. But where, as 
is usually the case, several creditors join in the petition, the 
rule is somewhat different. A creditor who has in good faith 
joined in an involuntary petition, cannot withdraw, against 
the objection of the rest, unless in a case where he was in- 
duced to join by misrepresentation or misunderstanding, in 
which event he may be allowed to withdraw at any time be- 
fore adjudication. In re Sargent, 13 N. B. R. 144, Fed. Cas. 
No. 12,361; In re Philadelphia Axle Works, 1 Wkly. Notes 
Cas. 126, Fed. Cas. No. 11,091. But where a majority of the 
creditors desire a dismissal of the proceedings, and will give 
proper secui-ity for the payment of the objecting creditors, th'» 
dismissal should be allowed. In re Indianapolis, C. & L. R. 
Co., 5 Biss. 287, Fed. Cas. No. 7,023. When an adjudication 
of bankruptcy is proved, the party who alleges that the p-'o- 
ceedings have been dismissed must prove the time of such dis- 
missal. Wills V. Claflin, 92 U. S. 135. A voluntary petition 
may be withdrawn, and all further proceedings stayed, on the 
application of the petitioner, before a decree has been made, 
upon proper cause shown and the payment of costs. Ex parte 
Randall, 5 Law Rep. 115, Fed. Cas. No. 11,550. Compare Ex 
parte Hariris, 3 N. Y. Leg. Obs. 152, Fed. Cas. No. 6,110. 

Conclusiveness of Adjudication. 

A decree of the federal district court sitting in bankruptcy, 
upon a petition in involuntary proceedings, whereby the debtor 
is adjudged and declared a bankrupt, is in the nature of a decree 
in rem, since it determines his legal status in that respect, and 
is therefore notice, of itself, to all creditors, and is conclusive 
evidence that all the facts necessary to sustain the decree were 
proved before the court, Shawhan v. Wherritt, 7 How. 627 ; 
In re Wallace, Deady, 433, Fed. Cas. No. 17,094; In re Banks, 
1 N. Y. Leg. Obs. 274, Fed. Cas. No. 938; Morse v. Godfrey, 



§ 18) PROCESS, PLEADINGS, AND ADJUDICATIONS. 117 

3 Story, 391, Fed. Cas. No. 9,836; Rayl v. Lapliam, 27 Ohio St. 
452; Lewis v. Sloan, C8 N. C. 557; Tliornton v. Hogan, 63 Mo. 
143. As a consequence of the proposition that the adjudica- 
tion is in rem, it follows that actual notice to the creditors is 
not essential to the jurisdiction of the court. Eayl v. Lapham, 
supra. And when the court had jurisdiction of the person and 
the subject-matter, and the adjudication is correct in form, it 
is conclusive of the fact decreed, and it cannot be attacked or 
impeached in any collateral proceeding, unless it be for fraud 
in obtaining it. Chapman v. Brewer, 114 U. S. 158, 5 Sup. 
Ct. 799; Graham v. Boston, H. & E. R. Co., 14 Fed. 753; In re 
McKinley, 7 Ben. 562, Fed. Cas. No. 8,864; Lewis v. Sloan, 68 
N. C. 557; Mount v. Manhattan Co., 41 N. J. Eq. 211, 3 Atl. 
726; Michaels v. Post, 21 Wall. 398. The adjudication is a 
judgment, and is as effective as any other judgment to cure ir- 
regularities in practice which do not touch the jurisdiction of 
the court. In re Getchell, 8 Ben. 256, Fed. Cas. No. 5,371. 
Moreover, the decree is conclusive as to the jurisdiction of the 
court rendering it, at least if the record shows the necessary 
jurisdictional facts. In re Ives, 5 Dill. 146, Fed. Cas. No. 
7,115. And it is also beyond legislative control. In re Raf- 
fauf, 6 Biss. 150, Fed. Cas. No. 11,525. A shareholder in a 
railroad corporation is a party to proceedings in involuntary 
bankruptcy against the company, and therefore cannot collat- 
erally impeach the proceedings. His remedy is to apply to the 
bankruptcy court, or to seek a review in the court having ap- 
pellate jurisdiction. Graham v. Boston, H. & E. R. Co., 118 
U. S. 161, 6 Sup. Ct. 1009. The fact that the debtor gave his 
aid to the signing, presenting, and filing of the petition, by 
soliciting some of the creditors to join in it, furnishes no 
ground for setting aside the adjudication. In re Duncan, 8 
Ben. 365, Fed. Cas. No. 4,131. An adjudication of bankruptcy 
passing by default against the bankrupt will not be opened to 
allow him to file an answer and contest the petition, where the 
answer proposed does not deny the act of bankruptcy charged. 



118 COUKTS AND PROCEDURE THEREIN. (Ch. 4 

but merely denies that the petitioners are creditors, or are suffl- 
cient in number and amount. In re Le Favour, 8 Ben. 43, 
Fed. Cas. No. 8,208. An adjudication in bankruptcy relates 
back to the filing of the original petition, and not to the time 
of an ancillary petition filed to correct an irregularity; and a 
levy after the filing of the original petition gives no lien. In 
re Bear, Fed. Cas. No. 1,177. 

Malicious Prosecution of Bankruptcy Proceedings. 

Proceedings to put a debtor into bankruptcy should never be 
resorted to as proceedings in terrorem to collect a debt; and if 
such action is taken by the creditor maliciously and without 
probable cause, and the petition is dismissed, the debtor is en- 
titled to recover, in an action brought for that purpose, the 
damages he has sustained by reason of the attempt to throw 
him into bankruptcy, and, if actual malice is proved, exemplary 
damages also. Sonneborn v. Stewart, 2 Woods, 599, Fed. Cas. 
No. 13,176. This case contains an elaborate and most able 
discussion of the whole topic by Mr. Justice Bradley. And 
see Cooley, Torts, 187; Add. Torts, § 867. 

JURY TRIALS. 

§ 19. a A person against whom an involuntary- 
petition has been filed shall be entitled to have a 
trial by jury, in respect to the question of his in- 
solvency, except as herein otherwise provided, and 
any act of bankruptcy alleged in such petition to 
have been committed, upon filing a virritten appli- 
cation therefor at or before the time w^ithin w^hich 
an answer may be filed. If such application is not 
filed within such time, a trial by jury shall be 
deemed to have been waived. 

& If a jury is not in attendance upon the court, 
one may be specially summoned for the trial, or the 



§ 20) OATHS, AFFIRMATIONS. 119 

case may be postponed, or, if the case is pending 
in one of the district courts within the jurisdiction 
of a circuit court of the United States, it may be 
certified for trial to the circuit court sitting at the 
same place, or by consent of parties ■when sitting 
at any other place in the same district, if such cir- 
cuit court has or is to have a jury first in attend- 
ance. 

c The right to submit matters in controversy, or 
an alleged offense under this act, to a jury, shall 
be determined and enjoyed, except as provided by 
this act, according to the United States laws now 
in force or such as may be hereafter enacted in re- 
lation to trials by jury. 

OATHS, AFFIBMATIONS. 

§ 20. o Oaths required by this act, except upon 
hearings in court, may be administered by (1) ref- 
erees ; (S3) officers authorized to administer oaths in 
proceedings before the courts of the United States, 
or under the law^s of the state w^here the same are 
to be taken ; and (3) diplomatic or consular officers 
of the United States in any foreign country. 

b Any person conscientiously opposed to taking 
an oath may, in lieu thereof, affirm. Any person 
w^ho shall affirm falsely shall be punished as for the 
making of a false oath. 

Who may Ackninister Oaths. 

The language of the above section is comprehensive enough 
to include almost any domestic officer; still, it has been held 
that a creditor must not verify his proof of debt before his own 
attorney, though the latter be a notary public. In re Nebe, 



120 COURTS AND PROCEDURE THEREIN. (Cll. 4 

11 N. B. R. 289, Fed. Gas. No. 10,073. And a proof of debt 
made by an offlcer of a corporation organized and existing 
under the laws of one state before a register in bankruptcy in 
another state, was rejected as insufficient. Ansonia Brass 
Co. V. Babbitt, 8 Hun (K Y.) 157. 

EVIDENCE. 

§ 21. a A court of bankruptcy may, upon appli- 
cation of any officer, bankrupt, or creditor, by or- 
der require any designated person, including the 
bankrupt, sxrh.o is a competent witness under the 
laws of the state in w^hich the proceedings are 
pending, to appear in court or before a referee or 
the judge of any state court, to be examined con- 
cerning the acts, conduct, or property of a bank- 
rupt whose estate is in process of administration 
under this act. 

b The right to take depositions in proceedings 
under this act shall be determined and enjoyed ac- 
cording to the Tlnited States law^s now in force, or 
such as may be hereafter enacted relating to the 
taking of depositions, except as herein provided. 

c Notice of the taking of depositions shall be filed 
w^ith the referee in every case. When depositions 
are to be taken in opposition to the allow^ance of a 
claim notice shall also be served upon the claimant, 
and w^hen in opposition to a discharge notice shall 
also be served upon the bankrupt. 

d Certified copies of proceedings before a referee, 
or of papers, when issued by the clerk or referee, 
shall be admitted as evidence \i^ith like force and 
effect as certified copies of the records of district 



§ 21) EVIDENCE. 121 

courts of .the United States are now or may here- 
after be admitted as evidence. 

e A certified copy of the order approving the 
bond of a trustee shall constitute conclusive evi- 
dence of the vesting in him of the title to the prop- 
erty of the bankrupt, and if recorded shall impart 
the same notice that a deed from the bankrupt to 
the trustee if recorded -would have imparted had 
not bankruptcy proceedings intervened. 

/ A certified copy of an order confirming or set- 
ting aside a composition, or granting or setting 
aside a discharge, not revoked, shall be evidence 
of the jurisdiction of the court, the regularity of 
the proceedings, and of the fact that the order was 
made. 

g A certified copy of an order confirming a com- 
position shall constitute evidence of the revesting 
of the title of his property in the bankrupt, and if 
recorded shall impart the same notice that a deed 
from the trustee to the bankrupt if recorded w^ould 
Impart. 

Examination of Witnesses. 

As to the examination of the bankrupt at the first meeting 
of creditors, and at other times as ordered by the court, see 
§ 7, supra. The wife of the bankrupt, if a competent wit- 
ness by the laws of the state, may be required to testify as 
to all facts or transactions to which she was either a party or 
a witness, but not to mere confessions or admissions of the 
husband in regard to his dealings with third persons; there 
is nothing in the act to destroy the privilege of such con- 
fidences. In re Gilbert, 1 Low. 340, Fed. Gas. No. 5,410. If 
she refuses to answer a proper question she may be punished 
for contempt. In re Woolford, 4 Ben. 9, Fed. Cas. No. 18,- 



122 COURTS AND PROCEDURE THEREIN. (Ch. 4 

029. A witness summoned under this section is not a party 
to the proceeding and is not entitled to be attended or repre- 
sented by counsel during his examination; neither is a cred- 
itor of the bankrupt a party to the proceeding, and therefore 
he is not entitled to interfere with it or be represented in it 
by counsel. In Be Comstock, 3 Sawy. 517, Fed. Cas. No. 
3,080. In the matter of securing the attendance of a witness 
in bankruptcy proceedings, the court may exercise all the 
power conferred upon it in ordinary civil cases (Eev. St. §^ 
876); hence the process may run into another district. In 
Ee Woodward, 8 Ben. 112, Fed. Cas. No. 18,000. 

EEFERENCE OF CASES AFTER ADJUDICATION. 

§ 23. o After a person has been adjudged a bank- 
rupt the judge may cause the trustee to proceed \eith 
the administration of the estate, or refer it (1) gener- 
ally to the referee or specially ■with only limited 
authority to act in the premises or to consider and 
report upon specified issues; or (2) to any referee 
■within the territorial jurisdiction of the court, if 
the convenience of parties in interest ■will be served 
thereby, or for cause, or if the bankrupt does not 
do business, reside, or have his domicile in the 
district. 

b The judge may, at any time, for the conven- 
ience of parties or for cause, transfer a case from 
one referee to another. 



§ 23; JURISDICTION OP U. S. AND STATE COURTS. 123 

JURISDICTION OP UNITED STATES AND STATE 
COURTS. 

§ 23. o The United States circuit courts shall 
have jurisdiction of all controversies at law and in 
equity, as distinguished from proceedings in bank- 
ruptcy, bet-ween trustees as such and adverse claim- 
ants concerning the property acquired or claimed by 
the trustees, in the same manner and to the same ex- 
tent only as though bankruptcy proceedings had 
not been instituted and such controversies had been 
betw^een the bankrupts and such adverse claimants. 

b Suits by the trustee shall only be brought or 
prosecuted in the courts where the bankrupt, w^hose 
estate is being administered by such trustee, might 
have brought or prosecuted them if proceedings in 
bankruptcy had not been instituted, unless by con- 
sent of the proposed defendant. 

c The TJnited States circuit courts shall have con- 
current jurisdiction with the courts of bankruptcy, 
Tvithin their respective territorial limits, of the of- 
fenses enumerated in this act. 

Jurisdiction of Federal and State Courts. 

Cases which involve the construction and application of a 
national bankruptcy law, such as those which arise between 
a trustee in bankruptcy and a person claiming an adverse in- 
terest touching any property or rights of property transfer- 
able to or vested in such trustee, are cases "arising under the 
laws of the United States," and therefore, under the prior 
acts of congress and independently of the foregoing provi- 
sions of the bankruptcy law, would be originally cognizable 
in the United States circuit courts, or removable thereto 
from the state courts, on the ground of involving a federal 



124 COURTS. AND PROCEDURK THEREIN, (Ch. 4 

question, without regard to the citizenship of the parties. 
Burbank v. Bigelow, 92 U. S. 179; Claflin v. Houseman, 93 
U. S. 13'0; Woolridge v. McKenna, 8 Fed. 650; Atkinson v. 
Purdy, Crabbe, 551, Fed. Cas. No. 616; Connor v. Scott, 4 
Dill. 242, Fed. Cas. No. 3,119; Payson v. Dietz, 2 Dill. 504, 
Fed. Cas. No. 10,861; Wehl v. Wald, 17 Blatchf. 342, Fed. 
Cas. No. 17,356. But the act, it will be observed, provides 
that the federal circuit courts shall have jurisdiction of such 
controversies only "in the same manner and to the same ex- 
tent as though bankruptcy proceedings had not been insti- 
tuted and such controversies had been between the bankrupts 
and such adverse claimants." This is equivalent to declar- 
ing that those courts shall not take cognizance of such contro- 
versies unless the bankrupt and the adverse claimant are 
citizens of different states and the amount in controversy ex- 
ceeds two thousand dollars. But the jurisdiction of the Unit- 
ed States district courts, sitting as courts of bankruptcy, 
is superior to and exclusive of the jurisdiction of the state 
courts in all matters arising under the bankruptcy law. In 
re Barrow, 1 N. B. E. 481, Fed. Cas. No. 1,057. 

The bankruptcy act of 1867 contained no provisions confer- 
ring or recognizing jurisdiction in the state courts to enter- 
tain controversies between the assignee in bankruptcy and 
adverse claimants. The foregoing provisions of the present 
act were probably suggested to its framers by the decided 
conflict of judicial opinion which existed in regard to the 
question whether state courts had jurisdiction of suits by 
trustees in bankruptcy for the recovery of assets or for other 
purposes. The difficulty arose from the construction of Rev. 
St. U. S. § 711, which gives to the federal courts exclusive 
jurisdiction "of all matters and proceedings in bankruptcy." 
The true principle was authoritatively stated by the supreme 
court of the United States in Eyster v. Gaff, 91 U. S. 521, 
where Mr. Justice Miller declared that: "The debtor of a 
bankrupt, or the man who contests the right to real or per- 



§ 23) JURISDICTION OF U. S. AND STATE COURTS. 125 

sonal property with him, loses none of those rights by the 
bankruptcy of his adversary. The same courts remain open 
to him in such contests, and the statute has not divested 
those courts of jurisdiction in such actions. If it has, for 
certain classes of actions, conferred a jurisdiction for the 
benefit of the assignee in the circuit and district courts of the 
United States, it is concurrent with, and does-not divest, that 
of the state courts." And see Burbank v. Bigelow, 92 U. S, 
179; Clark v. Ewing, 9 Biss. 440, 3 Fed. 83; In re Davis, 1 
Sawy. 260, Fed. Cas. Ko. 3,620; Scott v. Kelly, 22 Wall. 57; 
In re Miller, 6 Biss. 30, Fed. Cas. No. 9,551. But the state 
courts have no jurisdiction, for fraud or any other cause, to 
interfere with or set aside a sale of the bankrupt's property 
by the trustee. Akins v. Stradley, 51 Iowa, 414, 1 N. W. 
609. But if a trustee voluntarily submits himself to the ju- 
risdiction of the state court, and that court renders a judg- 
ment against him, it is then too late for him to allege that 
the federal courts have exclusive jurisdiction in bankruptcy. 
Scott V, Kelly, 22 Wall. 57. 

Concurrent Jurisdiction. 

Under the act of 1867, as already stated, there was consid- 
erable conflict of opinion as to whether the state courts had 
concurrent jurisdiction with the federal tribunals of actions 
brought by trustees in bankruptcy for the recovery of assets-. 
of the estate. The question was answered in the aflflrmative 
in the following cases : Boone v. Hall, 7 Bush, 66 ; Mann v.. 
Flower, 25 Minn. 500; Wooldbridge v. Eickert, 33 La. Ann. 
234; Barton v. Geiler, 3 Lea, 296; McLean v. St. John, 10 111. 
App. 367; Isett v. Stuart, 80 111. 404; Peiper v. Harmer, 8' 
Phila. 100; Clark v. Ewing, 3 Fed. 83; Jordan v. Downey, 
40 Md. 401; Cogdell v. Exum, 69 N. C. 464; Lathrop v.. 
Drake, 91 U. S. 516; Kidder v. Horrobin, 72 N. Y. 159; and in 
the negative in Sherwood v. Burns, 58 Ind. 502; Seavey v. 
Maples, 94 Ind. 205, and some others. But while Eev. St., 



126 COURTS AND PROCEDURE THEREIN. (Ch. 4 

U. S. § 711, does indeed confer upon the federal courts exclu- 
sive jurisdiction of "all matters and proceedings in bank- 
ruptcy," yet the true construction of that section is un- 
doubtedly the one which confines this exclusive jurisdic- 
tion to proceedings which are essentially peculiar to the 
bankruptcy law and to actions which could not be main- 
tained by any person independently of that law. In enter- 
taining jurisdiction of the trustee's suit to recover assets, 
the state court is not proceeding under the bankruptcy act, 
but simply recognizes that act as the source of the trustee's 
title, in the same manner as it would if he derived his title 
from a deed or contract. These views were suggested in 
Jordan v. Downey, 40 Md. 401. And see, to the same effect, 
Eyster v. Gaff, 91 U. S. 521 ; Burbank v. Bigelow, 92 U. S. 179. 
But when the object of the trustee's action is to set aside 
a conveyance made by the bankrupt in fraud of the act, 
or by way of illegal preference, it has been held that the 
state court has no jurisdiction, because (1) such a suit can 
be maintained only under the bankruptcy law, and (2) a 
court of equity will not entertain a bill unless it has com- 
plete control over all the matters in controversy, directly 
or by coercion of the parties, and this does not exist in the 
■case of the trustee in bankruptcy. Voorhies v. Frisbie, 25 
Mich. 476; Brigham v. Claflin, 31 Wis. 607. A contrary 
view, however, prevails in some of the states (Otis v. Had- 
ley, 112 Mass. 100; Goodrich v. Wilson, 119 Mass. 429; Rison 
T. Powell, 28 Ark. 427) and is clearly sanctioned by the de- 
cision of the United States supreme court in McKenna v. 
Simpson, 129 U. S. 507, 9 Sup. Ct. 365. A state court has 
no jurisdiction of a suit to enjoin the collection of assets 
by a trustee in bankruptcy. Southern v. Fisher, 6 S. C. 345. 
The jurisdiction of all matters in bankruptcy vested in the 
federal courts is not exclusive of that of the state courts to 
entertain an action for the abatement of a liquor nuisance 
on property belonging to the bankrupt's estate, that being 



§ 23) JURISDICTION OF U. S. AND STATE COURTS. 127 

a matter of police regulation, which does not interfere with 
the bankruptcy jurisdiction of the federal courts. Rad- 
ford T. Thornell, 81 Iowa, 709, 45 N. W. 800. That mort- 
gaged property is subject to be administered in bankruptcy 
will not entitle the mortgagor to resist the administration 
of it by foreclosure and sale under proceedings in the ap- 
propriate court of the state. Broach t. iPowell, 79 Ga. 79, 
3 S. E. 763. 

Actions Against Trustees. 

A purchase of goods on credit by one in insolvent circum- 
stances, with the intention to use their proceeds in paying 
other creditors, and with no intention of paying for them, is 
fraudulent, and if the vendor can identify the goods, and acts 
within a reasonable time, he can recover them from the trus- 
tee in bankruptcy of the vendee. Donaldson v. Farwell, 5 
Biss. 451, Fed. Cas. No. 3,983. So, the principal of a bank- 
rupt factor may recover from the trustee any of the goods 
remaining unsold, or any proceeds of the sale of such goods 
which the trustee himself has received, or which remain spe- 
cifically distinguishable from the mass of the bankrupt's prop- 
erty. Nutter V. Wheeler, 2 Low. 346, Fed. Cas. No. 10,384. 
But the estate of the bankrupt is not answerable for the tor- 
tious acts of the trustee. Adams v. Meyers, 1 Sawy. 306, 
Fed. Cas. No. 62. But an action will lie in a state court 
against a trustee in bankruptcy, to recover the amount of a 
dividend declared and due to a creditor of the estate, which 
the trustee has fraudulently withheld and converted to his 
own use. Berford v. Barnes, 45 Hun, 253. It has been held 
that the assignee of a bankrupt cannot, either voluntarily or 
by service of process, become a party to a suit in a state court 
to enforce a lien against the bankrupt's lands, except by ex- 
press authority from the bankruptcy court, as that court, un- 
der the statute, has exclusive jurisdiction over the entire es- 
tate. Price V. Price, 4 Hughes, 438, 48 Fed. 823. 



128 COURTS AND PEOCEDURE THEREIN. (Ch. 4 

Conflicting Jurisdiction of Federal and State Courts. 

It is a well-settled general rule that, when property is seized 
and held under mesne or final process of either a state court or 
a court of the United States, it is in the custody of the law and 
within the exclusive jurisdiction of the court from which the 
process has issued, for the purposes of the writ, and the posses- 
sion of the oflScer having it in custody cannot be disturbed by 
another court of co-ordinate jurisdiction, or its ofiQcers, by at- 
tachment, levy of execution, replevin, or otherwise; and also 
that, as between a federal and a state court, when the one court 
has appointed a receiver of property and he has taken posses- 
sion, the other court will not interfere with his custody and 
control of the property, by the appointment of another receiver 
or otherwise. Wallace v. McConnell, 13 Pet. 136 ; Taylor v. 
Carryl, 20 How. 583; Covell v. Heyman, 111 U. S. 176, 4 Sup. 
Ct. 355; Peale v. Phipps, 14 How. 368; Porter v. Sabin, 149 
U. S. 473, 13 Sup. Ot. 1008; Shields v. Coleman, 157 U. S. 168, 
15 Sup. Ct. 570. But difficulty arises in the application ■ 
these rules when the contest for the possession of property is 
between an assignee under the federal bankruptcy law and a 
receiver or other officer of a state court. Several cases are 
found in the reports of the inferior federal courts wherein it 
is held that, although an insolvent corporation is in the hands 
of a receiver appointed by a state court, this will not de- 
prive the national courts of jurisdiction in proceedings 
against the corporation under the bankruptcy law; for, it is 
said, any other construction would entirely defeat the oper- 
ation of that law. In re Green Pond E. Co., 13 N. B. R. 
118, Fed. Gas. No. 5,786 ; In re Safe Deposit & Sav. Inst., 7 
N. B. E. 392, Fed. Cas. No. 12,211; In re Washington Marine 
Ins. Co., 2 Ben. 292, Fed. Cas. No. 17,246; In re Merchants' 
Ins. Co., 3 Biss. 162, Fed. Cas. No. 9,441; In re National Life 
Ins. Co., 6 Biss. 25, Fed. Cas. No. 10,046. And in another 
case, it was ruled that proceedings in bankruptcy supersede 
a creditors' bill in a state court ; and that a receiver appoint- 



§ '23) JURISDICTION OF V. S. AND STATE COURTS. 129 

ed by the state court may be compelled to deliver the prop- 
erty over to the assignee in bankruptcy, subject to all the 
rights which the creditors whom he specifically represents 
have obtained, and to all the priorities which they have se- 
cured by their diligence. In re Whipple, 6 Biss. 516, Fed. 
Cas. No. 17,512. But this view is contradicted by a consid- 
erable body of authorities. See Goodrich v. Remington, 6 
Blatchf. 515, Fed. Cas. No. 5,546; In re Clark, 4 Ben. 88, Fed. 
Cas. No. 2,798; Sedgwick v. Menck, 6 Blatchf. 156, Fed. Cas. 
No. 12,616. In another case, property was forcibly taken by 
the marshal, under a warrant issued in bankruptcy proceed- 
ings, from the possession of a receiver appointed by a state 
court in proceedings supplementary to execution against the 
bankrupt, and was by the marshal handed over to the as- 
signee when appointed. The assignee applied for an order to 
sell the property. But it was held that the court would not 
summarily order a sale of property so taken, against the pro- 
test of the receiver; the title of the assignee to the property 
must be enforced by a plenary suit. In re Hulst, 7 Ben. 17, 
Fed. Cas. No. 6,863. In the case of Alden v. Boston, H. & 
E. E. Co., 5 N. B. E. 230, Fed. Cas. No. 152, it was said that 
the federal court in bankruptcy will not interfere with the 
possession of receivers appointed by the state courts to take 
charge of the property of a railroad, until their title is im- 
peached for some cause for which it is impeachable under 
the bankruptcy act; nor is it for the bankruptcy court, be- 
fore such title is thus impeached, to interfere with the man- 
agement or control of such railroad or other property by the 
state court or its receivers. So, again, in Davis v. Railroad 
Co., 1 Woods, 661, Fed. Cas. No. 3,648, it is ruled that a re- 
ceiver in possession of mortgaged premises under order of a 
state court of chancery, in proceedings for foreclosure, prior 
to the commencement of proceedings in bankruptcy, cannot 
be dispossessed by order of the federal court in the bankrupt- 
cy proceedings. Such possession is a lawful one under a 
BL. BANK.— 9 



130 COURTS AND PROCEDURE THEREIN. (Ch: 4 

speciflc and vested lien, and can only be interfered with by 
the assignee in bankruptcy by payment and redemption of 
the mortgage. An assignee in bankruptcy cannot maintain 
an action in a federal court to recover property of the bank- 
rupt from the possession of a state sheriff, who has taken 
it upon attachment or other process duly issued to him out 
of a state court before the proceedings in bankruptcy were 
commenced. Johnson v. Bishop, Woolw. 324, Fed. Cas. No. 
7,373; Townsend v. Leonard, 8 Dill. 370, Fed. Cas. No. 14,- 
117. And, on similar principles, where one of two partners 
has died, and, under the statute of the state, the partnership 
property is placed in the hands of the executor of the de- 
ceased partner to be administered, the bankruptcy court will 
not, on a petition against the surviving partner, take the es- 
tate out of the hands of such executor. In re Daggett, 8 
N. B. E. 287, Fed. Cas. No. 3,535. Where petitions for ad- 
judication are filed in two or more district courts, each hav- 
ing jurisdiction, the court in which the petition is first filed 
ought to be accorded exclusive jurisdiction over the case. 
In re Boston, H. & E. K. Co., 9 Blatchf. 409, Fed. Cas. No. 
1,678. 



§ 25) APPEALS AND WRITS OP ERROR. 131 

JURISDICTION OF APPELLATE COURTS. 

§ 24. a The supreme court of the TJnited States, 
the circuit courts of appeals of the United States, and 
the supreme courts of the territories, in vacation 
in chambers and during their respective terms, as 
no"wr or as they may be hereafter held, are hereby 
invested -with appellate jurisdiction of controversies 
arising in bankruptcy proceedings from the courts 
of bankruptcy from "which they have appellate 
jurisdiction in other cases. The supreme court of 
the United States shall exercise a like jurisdiction 
from courts of bankruptcy not -within any organ- 
ized circuit of the United States and from the su- 
preme court of the District of Columbia. 

h The several circuit courts of appeal shall have 
jurisdiction in equity, either interlocutory or final, 
to superintend and revise in matter of law the pro- 
ceedings of the several inferior courts of bankruptcy 
-within their jurisdiction. Such po-wer shall be ex- 
ercised on due notice and petition by any party 
aggrieved. 

APPEALS AND WRITS OF ERROR. 

§ 25. a That appeals, as in equity cases, may be 
taken in bankruptcy proceedings from the courts 
of bankruptcy to the circuit court of appeals of the 
United States, and to the supreme court of the ter- 
ritories, in the following cases, to wit, (1) from a 
judgment adjudging or refusing to adjudge the de- 
fendant a bankrupt; (2) from a judgment granting 
or denying a discharge; and (3) from a judgment 
allowing or rejecting a debt or claim of five hun- 



132 COURTS AND PROCEDURE THEREIN. (Uh. 4 

dred dollars or over. Such appeal shall be taken 
within ten days after the judgment appealed from 
has been rendered, and may be heard and deter- 
mined by the appellate court in term or vacation, 
as the case may be. 

6 From any final decision of a court of appeals, 
allo\ping or rejecting a claim under this act, an 
appeal may be had under such rules and -within 
such time as may be prescribed by the supreme 
court of the United States, in the following cases 
and no other: 

1. Where the amount in controversy exceeds the 
sum of two thousand dollars, and the question in- 
volved is one w^hich might have been taken on 
appeal or w^rit of error from the highest court of a 
state to the supreme court of the United States; or 

2. Where some justice of the supreme court of 
the United States shall certify that in his opinion 
the determination of the question or questions in- 
volved in the allow^ance or rejection of such claim 
is essential to a uniform construction of this act 
throughout the United States. 

c Trustees shall not be required to give bond 
■when they take appeals or sue out w^rits of error. 

d Controversies may be certified to the supreme 
court of the United States from other courts of the 
United States, and the former court may exercise 
jurisdiction thereof and issue w^rits of certiorari pur- 
suant to the provisions of the United States laws 
now in force or such as may be hereafter enacted. 



§ 25) APPEALS AND WRITS OF ERROR. 133 

APPELLATE JURISDICTION. 

Jur'isdiction of Circuit Court of Appeals. 

The language of the foregoing sections (which is substan- 
tially similar to that of the corresponding section of the act 
of 1867) evidently contemplates that an appeal should not be 
allowed from an interlocutory order or decree made in the 
progress of the bankruptcy proceedings, except only in the 
cases specified; apart from these, the decision, to be appeal- 
able, must be final as to all the matters within its scope. 
Clark V. Iselin, 9 Blatchf. 196, Fed. Cas. No. 2,824; Piatt t. 
Stewart, 47 How. Prac. 206. The action of the district court 
in the exercise of its summary jurisdiction cannot be brought 
before the appellate court under this section. In re Clark, 9 
Blatchf. 372, Fed. Cas. No. 2,801. And under the former 
statute, an appeal could not be taken for the purpose of ob- 
taining a revision of the decision of the district court granting 
or refusing a discharge to the bankrupt. Coit v. Eobinson, 
19 Wall. 274; Ruddick v. Billings, Woolw. 330, Fed. Cas. No. 
12,110. But this is one of the cases in which the present act 
specifically allows an appeal. An appeal will lie in a suit by 
a trustee in bankruptcy to set aside a claim, and its lien, as 
against the estate, (Barron v. Morris, 14 N. B. E. 371, Fed. Cas. 
No. 1,055) and from a decision allowing or rejecting a claim. 
Wiswall V. Campbell, 15 N. B. R. 421. 

Upon Writ of Error. 

When this form of procedure is employed, it is always the 
law decided that is subject to review, and not the facts. Rud- 
dick V. Billings, Woolw. 330, Fed. Cas. No. 12,110. Hence, 
when the decision of the district court is based upon the re- 
port of a referee, the findings of fact made by him are con- 
clusive in the appellate court, and only his conclusions of law 
can be questioned, and that only so far as they are challenged 



134 COURTS AND PEOCEDUEE THEEEIN. (Ch. 4 

by exceptions filed in the district court. Sicard v. BuflfaJo, 
N. Y. & P. B. Co., 15 Blatchf. 525, Fed. Cas. No. 12,831. And 
a bill of exceptions is insufficient if it shows on its face that 
it could not have been taken at the trial. Strain v. Gourdin, 
2 Woods, 380, Fed. Cas. No. 13,521. So, a writ of error will 
not lie when the case is tried by the district court without a 
jury. Blair v. Allen, 3 Dill. 101, Fed. Cas. No. 1,483. And a 
denial of a motion for a nonsuit is not reviewable on error. 
Miller v. Jones, 15 N, B. E. 150, Fed. Cas. No. 9,576. 

Practice on Appeal. 

In case of an appeal under this section, failure on the part 
of the appellant or plaintiff in error to give the required notice 
within the time limited is fatal. Wood v. Bailey, 21 Wall. 
640; In re York, 4 N. B. R 479, Fed. Cas. No. 18,139; In re 
Place, 4 N. B. E. 541, Fed. Cas. No. 11,200; Hawkins v. Hast- 
ings Bank, 1 Dill. 453, Fed. Cas. No. 6,245. But where the 
omission to take the appeal in time arose from a mistake in 
the selection of the remedy, the court suggested that perhaps 
the district court would grant a review of its decree, in order 
that a regular appeal might, if necessary, be taken. Stick- 
ney v. Wilt, 23 Wall. 150. 

ARBITRATION OP CONTROVERSIES. 

§ 26. a The trustee may, pursuant to the direc- 
tion of the court, submit to arbitration any contro- 
versy arising in the settlement of the estate. 

6 Three arbitrators shall be chosen by mutual 
consent, or one by the trustee, one by the other 
party to the controversy, and the third by the two 
so chosen, or if they fail to agree in five days after 
their appointment the court shall appoint the third 
arbitrator. 



§ 27) COMPROMISES. 135 

c The written finding of the arbitrators, or a ma- 
jority of them, as to the issues presented, may be 
filed in court and shall have like force and effect as 
the verdict of a jury. 

COMPROMISES. 

§ 27. a The trustee may, with the approval of 
the court, compromise any controversy arising in 
the administration of the estate upon such terms as 
he may deem for the best interests of the estate. 

Oonipromises. 

Under the general orders in bankruptcy promulgated pur- 
suant to the law of 1867, a bankruptcy court could not au- 
thorize a compromise except upon testimony, and upon a peti- 
tion clearly and distinctly setting forth "the subject-matter 
of the controversy and the reasons why the assignee thinks 
it proper, and most for the interest of the creditors, that it 
should be settled." In re Hoole, 3 Fed. 496. It was held that 
the court could not empower the assignee to "compound all 
doubtful claims with the consent and approbation of a com- 
mittee of creditors." In re Dibblee, 3 Ben. 354, Fed. Cas. 
jSTo. 3,885. A bankruptcy court has power to vacate an order 
authorizing the surrender of certain life insurance policies to 
a creditor, to whom they had been pledged, upon the release 
of the debt which they had been given to secure, where such 
order was procured by a material misrepresentation of the 
facts, although the misrepresentations were not necessarily 
fraudulent, where the court would not have originally made 
such order if the real facts had been known. In re Hoole, 3 
Fed. 496. 



136 COURTS AND PROCEDURE THERKIN. (Ch. i 



DESIGNATION OF NEWSPAPERS. 

§ 28. a Courts of bankruptcy shall by order des- 
ignate a newspaper published -writhin their respec- 
tive territorial districts, and in the county in which 
the bankrupt resides or the major part of his prop- 
erty is situated, in w^hich notices required to be pub- 
lished by this act and orders Tvhich the court may 
direct to be published shall be inserted. Any court 
may in a particular case, for the convenience of 
parties in interest, designate some additional news- 
paper in w^hich notices and orders in such case shall 
be published. 

OFFENSES. 

§ 29. a A person shall be punished, by impris- 
onment for a period not to exceed five years, upon 
conviction of the offense of having knowingly and 
fraudulently appropriated to his ow^n use, embez- 
zled, spent, or unlaw^fuUy transferred any property 
or secreted or destroyed any document belonging 
to a bankrupt estate which came into his charge as 
trustee. 

b A person shall be punished, by imprisonment 
for a period not to exceed tw^o years, upon convic- 
tion of the offense of having know^ingly and fraudu- 
lently (1) concealed w^hile a bankrupt, or after his 
discharge, from his trustee any of the property be- 
longing to his estate in bankruptcy; or (2) made a 
false oath or account in, or in relation to, any pro- 
ceeding in bankruptcy; (3) presented under oath 
any false claim for proof against the estate of a 
bankrupt, or used any sijch claim in composition 



§ 29) OFFENSES. 137 

personally or by agent, proxy, or attorney, or as 
agent, proxy, or attorney; or (4) received any ma- 
terial amount of property from a bankrupt after 
the filing of the petition, with intent to defeat this 
act; or (5) extorted or attempted to extort any 
money or property from any person as a considera- 
tion for acting or forbearing to act in bankruptcy 
proceedings. 

c A person shall be punished by fine, not to ex- 
ceed five hundred dollars, and forfeit his office, and 
the same shall thereupon become vacant, upon 
conviction of the offense of having knowingly (1) 
acted as a referee in a case in ■which he is directly 
or indirectly interested; or (2) purchased, while a 
referee, directly or indirectly, any property of the 
estate in bankruptcy of w^hich he is referee; or (3) 
refused, w^hile a referee or trustee, to permit a 
reasonable opportunity for the inspection of the 
accounts relating to the affairs of, and the papers 
and records of, estates in his charge by parties in 
interest -when directed by the court so to do. 

d A person shall not be prosecuted for any of- 
fense arising under this act unless the indictment 
is found or the information is filed in court w^ithin 
one year after the commission of the offense. 

Grimes and Crvmi/nal Procedure. 

A bankrupt who wilfully and fraudulently omits some of 
Ms assets from his inventory or schedule, contrary to the pro- 
visions of the statute, may be prosecuted by information. The 
offense is not an infamous crime, within the meaning of that 
term at common law and as used in the fifth amendment to 
the constitution. U. S. v. Block, 15 X. B. R. .325, Fed. Cas. 
INo. 14,609. It has been held that bankrupts are not compe- 



138 COURTS AND PROCEDUKE THEREIN. (Ch. 4 

tent witnesses in proceedings against them under the crim- 
inal clauses of the act. U. R. v. Black, 12 N. B. R. 340, Fed. 
Cas. No. 14,602. But on the other hand, it has been declared 
(in a criminal case founded on a different statute) that the 
laws of the United States permit a person charged with crime 
or misdemeanor to be a witness in his own behalf, and such 
weight is to be given to his testimony as, under all the cir- 
cumstances, it is fairly entitled to. U. S. v. Houghton, 14 
Fed. 544. 

It is provided by Rev. St. U. S. § 5440, that "if two or 
more persons conspire to commit any offense against the 
United States in any manner or for any purpose * * * all 
the parties to such conspiracy shall be liable to a penalty." 
Under this section, it has been held that persons may be in- 
dicted for conspiring with the bankrupt to commit the acts 
made criminal by the bankruptcy law, although no one but 
the bankrupt himself is mentioned in that connection. U. S. 
V. Bayer, 4 Dill. 407, Fed. Cas. No. 14,547, 

Crimes After Adjudication. 

Where a bankrupt omitted to state in his schedule the 
amount of money in the hands of a receiver appointed by a 
state court in a suit between him and his co-partner in rela- 
tion to partnership property, but stated that the partnership 
assets would no more than pay the expenses of their litiga- 
tion, and that he was not able to state their exact amount, it 
was held that the omission was no ground for refusing a dis- 
charge, and that an affidavit to the truth of the schedule was 
not prima facie perjury. In re Shoemaker, 4 Biss. 245, Fed. 
Cas. No. 12,799. Where an indictment under the bankrupt 
law for wilful and fraudulent concealment of his goods by 
a bankrupt alleged such concealment some months after the 
adjudication, "all then and there the property" of him the 
said bankrupt, it was held, that the failure to allege spe- 
cifically that the property concealed was the property of the 



§ 31) ci>MPUTATION OF TIME. 139 

bankrupt, at the time of the adjudication in bankruptcy, 
was a formal defect, U. S. v. Jackson, 2 Fed. 502. 



RULES, rORMS, AND ORDERS. 

§ 30. a All necessary rules, forms, and orders 
as to procedure and for carrying this act into force 
and effect shall be prescribed, and may be amended 
from time to time, by the supreme court of the 
United States. 

COMPUTATION OP TIME. 

§ 31. a Whenever time is enumerated by days 
in this act, or in any proceeding in bankruptcy, 
the number of days shall be computed by exclud- 
ing the first and including the last, unless the last 
fall on a Sunday or holiday, in •wrhieh event the 
day last included shall be the next day thereafter 
w^hich is not a Sunday or a legal holiday. 

Computation of Time. 

Unless Sunday is especially excepted in the statute, it is 
to be. counted; and it has been held that the fair and unavoid- 
able inference from this section is that when Sunday is not 
the last day it is not to be excluded. In re York, 4 N. B. E. 
479, Fed. Cas. No. 18,139. Although the filing of the petition 
is the commencement of the bankruptcy proceedings, yet they 
are not to be deemed commenced until the petition is actually 
filed, although it was previously made, signed, and verified. 
Wells V. Brackett, 30 Me. 61. And it is not the filing of every 
petition that is deemed the commencement of proceedings, but 
the filing of a petition upon which an order of adjudication 
may be made by the court. In re Rogers, 10 N. B. E. 444, Fed. 
Cas. No. 12,003. 



140 COURTS AND PBOCEDURE THEREIN. (Ch. 4 

TRANSFER OF CASES, 

§ 32. a In the event petitions are filed against 
the same person, or against different members of a 
partnership, in diflferent courts of bankruptcy each 
of ■which has jurisdiction, the cases shall be trans- 
ferred, by order of the courts relinquishing juris- 
diction, to and be consolidated by the one of such 
courts which can proceed with the same for the 
greatest convenience of parties in interest. 



§ 35) OFIJ-ICEES, THEIR DUTIES AND COMPENSATION. 141 

CHAPTEB V. 

OFFICERS, THEIR DUTIES AND COMPENSATION. 

CBEATION or TWO OFFICES. 

§ 33. a The offices of referee and trustee are 
hereby created. 

APPOINTMENT, KEMOVAL, AND DISTRICTS OF 
REFEREES. 

s 

§ 34. a Courts of bankruptcy shall, -within the 
territorial limits of -which they respectively have 
jurisdiction, (1) appoint referees, each for a term of 
t-wo years, and may, in their discretion, remove 
them because their services are not needed or for 
other cause; and (2) designate, and from time to time 
change, the limits of the districts of referees, so 
that each county, -where the ser-\nces of a referee 
are needed, may constitute at least one district. 

QUALIFICATIONS OF REFEREES. 

§ 35. a Indi-viduals shall not be eligible to ap- 
pointment as referees unless they are respectively 

(1) competent to perform the duties of that office ; 

(2) not holding any office of profit or emolument 
under the la-ws of the United States or of any state 
other than commissioners of deeds, justices of the 
peace, masters in chancery, or notaries public ; (3) 
not related by consanguinity or affinity, -within 
the third degree as determined by the common la-w, 
to any of the judges of the courts of bankruptcy 



142 OFFICERS, THeIe DUTIES AND COMPENSATION. (Ch. 5 

or circuit courts of the TJnited States, or of the 
justices or judges of the appellate courts of the 
districts wherein they may be appointed ; and (4) 
residents of, or have their offices in, the territorial 
districts for which they are to be appointed. 

Qualifications of Referees. 

The bankruptcy act of 1867 provided that no person 
should be eligible to the oflBice of register in bankruptcy un- 
less he was an attorney or counselor at law. In explanation 
of the phrase "office of profit or emolument," we append cer- 
tain definitions and decisions which may be found useful. 
''Emolument" is defined by Webster as "the profit arising 
from office or employment; that which is received as a com- 
pensation for services, or which is annexed to the possession 
of an office as salary, fees, and perquisites; advantage; gain, 
public or private." This definition is adopted in Apple v. 
Crawford Co., 105 Pa. St. 300. The office of postmaster is 
an office both of profit and trust under the authority of con- 
gress. McGregor v. Balch, 14 Vt. 434. A member of the 
state legislature holds an office of profit as well as of honor. 
State V. Valle, 41 Mo. 29. The offices of county recorder 
and county commissioner are lucrative offices within the 
meaning of the state constitution. Dailey v. State, 8 
Blackf. 329. So is the office of inspector of customs. 
Crawford v. Dunbar, 52 Cal. 36. And so is the federal office 
of surveyor general. People v. Whitman, 10 Cal. 38. 

OATHS or OFFICE OF EEFEBEES. 

§ 36. a Referees shall take the same oath of of- 
fice as that prescribed for judges of the United 
States courts. 



§ ob JURISDICTION OF REFEREES. 143 

NUMBER OF REFEREES. 

§ 37. a Sucla number of referees shall be ap- 
pointed as may be necessary to assist in expedi- 
tiously transacting: the bankruptcy business pendinig 
in the various courts of bankruptcy. 

JURISDICTIOH" OF REFEREES. 

§ 38. a Referees respectively are hereby invest- 
ed, subject always to a review by the judge, -within 
the limits of their districts as established from time 
to time, -with jurisdiction to (1) consider all peti- 
tions referred to them by the clerks and make the 
adjudications or dismiss the petitions ; (S) exercise 
the pow^ers vested in courts of bankruptcy for the 
administering of oaths to and the examination of 
persons as witnesses and for requiring the produc- 
tion of documents in proceedings before them, ex- 
cept the pow^er of commitment; (3) exercise the 
pow^ers of the judge for the taking possession and 
releasing of the property of the bankrupt in the 
event of the issuance by the clerk of a certificate 
showing the absence of a judge from the judicial 
district, or the division of the district, or his sickness, 
or inability to act; (4) perform such part of the du- 
ties, except as to questions arising out of the applica- 
tions of bankrupts for compositions or discharges, as 
are by this act conferred on courts of bankruptcy and 
as shall be prescribed by rules or orders of the 
courts of bankruptcy of their respective districts, 
except as herein otherwise provided; and (5) upon 
the application of the trustee during the examina- 
tion of the bankrupts, or other proceedings, author- 



144 OFFICERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

ize the employment of stenographers at the ex- 
pense of the estates at a compensation not to ex- 
ceed ten cents per folio for reporting and transcrib- 
ing the proceedings. 

Powers of Referees. 

The proceedings before a referee in bankruptcy are to be 
conducted by him with the exercise of proper legal discre- 
tion, and, subject to that rule, are entirely within his con- 
trol. In re Hyman, 2 N. B. K. 333, Fed. Cas. No. 6,984. 
The validity of an ordep made by a register in bankruptcy, 
except such as the judge alone has power to make, cannot 
be collaterally questioned in the absence of any showing 
that it was disapproved by the court. Geisreiter v. Sevier, 
33 Ark. 522. On the adjudication of bankruptcy, the regis- 
ter is authorized and required to receive the surrender of 
the bankrupt's estate, and to keep the property safely until 
it can be turned- over to the trustee. In re Hasbrouck, 1 
Ben. 402, Fed. Cas. No. 6,189. In a proper case the regis- 
ter may appoint a watchman to take charge of the property. 
In re Bogert, 2 N. B. E. 585, Fed. Cas. No. 1,599. The reg- 
ister has no power, on the mere application of creditors, to 
issue a summons for the examination of a trustee, or for 
the production by him of the books and papers mentioned in 
the summons, where such trustee has been duly appointed 
by the creditors (pursuant to section 43 of the act of 1867) 
to settle up the estate. In re Hicks. 2 Fed. 851. 



§ 39j DUTIES OF REFEREES. 145 



DUTIES OF REFKBEES. 

§ 39. a Beferees shall (1) declare dividends and 
prepare and deliver to trustees dividend sheets 
showing the dividends declared and to whom pay- 
able; (2) examine all schedules of property and 
lists of creditors filed by bankrupts and cause such 
as are incomplete or defective to be amended; (3) 
furnish such information concerning the estates in 
process of administration before them as may be 
requested by the parties in interest; (4) give noti- 
ces to creditors as herein provided; (5) make up 
records embodying the evidence, or the substance 
thereof, as agreed upon by the parties in all con- 
tested matters arising before them, w^henever re- 
quested to do so by either of the parties thereto, 
together w^ith their findings therein, and transmit 
them to the judges; (6) prepare and file the sched- 
ules of property and lists of creditors required to 
be filed by the bankrupts, or cause the same to be 
done, when the bankrupts fail, refuse, or neglect 
to do so; (7) safely keep, perfect, and transmit to 
the clerks the records, herein required to be kept 
by them, w^hen the cases are concluded; (8) trans- 
mit to the clerks such papers as may be on file 
before them whenever the same are needed in any 
proceedings in courts, and in like manner secure 
the return of such papers after they have been used, 
or, if it be impracticable to transmit the original 
papers, transmit certified copies thereof by mail; 
(9) upon application of any party in interest, pre- 
serve the evidence taken or the substance thereof 
as agreed upon by the parties before them when 

BL. BANK.— 10 



146 OFFICERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

a stenographer is not in attendance; and (10) when- 
ever their respective offices are in the same cities 
or to-wns where the courts of bankruptcy convene, 
call upon and receive from the clerks all papers 
filed in courts of bankruptcy which have been re- 
ferred to them. 

b Referees shall not (1) act in cases in which they 
are directly or indirectly interested; (S) practice as 
attorneys and counselors at law In any bankruptcy 
proceedings; or (3) purchase, directly or indirectly, 
any property of an estate in bankruptcy. 

COMPENSATION OF REFEREES. 

§ 40. a Referees shall receive as full compensa- 
tion for their services, payable after they are ren- 
dered, a fee of ten dollars deposited with the clerk 
at the time the petition is filed in each case, except 
w^hen a fee is not required from a voluntary bank- 
rupt, and from estates w^hich have been adminis- 
tered before them one per centum commissions on 
sums to be paid as dividends and commissions, or 
one-half of one per centum on the amount to be 
paid to creditors upon the confirmation of a com- 
position. 

6 Whenever a case is transferred from one ref- 
eree to another the judge shall determine the pro- 
portion in which the fee and commissions therefor 
shall be divided between the referees. 

c In the event of the reference of a case being 
revoked before it is concluded, and w^hen the case 
is specially referred, the judge shall determine 
w^hat part of the fee and commissions shall be paid 
to the referee. 



§41) CONTEMPTS BEFORE REFEREES. 147 



CONTEMPTS BEFORE REFEREES. 

§ 41. a A person shall not, in proceedings before 
a referee, (1) disobey or resist any. lawful order, 
process, or ■writ; (2) misbehave during a hearing 
or so near the place thereof as to obstruct the same; 
(3) neglect to produce, after having been ordered 
to do so, any pertinent document; or (4) refuse to 
appear after having been subpoenaed, or, upon ap- 
pearing, refuse to take the oath as a witness, or, 
after having taken the oath, refuse to be examined 
according to law: provided, that no person shall be 
required to attend as a witness before a referee at 
a place outside of the state of his residence, and 
more than one hundred miles from such place of 
residence, and only in case his lawful mileage and 
fee for one day's attendance shall be first paid or 
tendered to him. 

b The referee shall certify the facts to the judge, 
if any person shall do any of the things forbidden 
in this section. The judge shall thereupon, in a 
summary manner, hear the evidence as to the acts 
complained of, and, if it is such as to w^arrant him 
in so doing, punish such person in the same man- 
n^er and to the same extent as for a contempt com- 
mitted before the court of bankruptcy, or commit 
such person upon the same conditions as if the 
doing of the forbidden act had occurred w^ith ref- 
erence to the process of, or in the presence of, the 
court. 



148 OFFICERS, THEIE DUTIES AND COMPENSATION. (Ch. 5 

RECDRDS OP REFEREES. 

§ 43. a The records of all proceedings in each 
case before a referee shall be kept as nearly as 
may be in the same manner as records are now 
kept in equity cases in circuit courts of the United 
States. 

6 A record of the proceedings in each case shall 
be kept in a separate book or books, and shall, to- 
gether with the papers on file, constitute the records 
of the case. 

c The book or books containing a record of the 
proceedings shall, when the case is concluded be- 
fore the referee, be certified to by him, and, together 
w^ith such papers as are on file before him, be trans- 
mitted to the court of bankruptcy and shall there 
remain as a part of the records of the court. 

REFEREE'S ABSENCE OR DISABILITY. 

§ 43. a Whenever the oflB.ce of a referee is va- 
cant, or its occupant is absent or disqualified to 
act, the judge may act, or may appoint another 
referee, or another referee holding an appointment 
under the same court may, by order of the judge, 
temporarily fill the vacancy. 



§ 44) APPOINTMENT OF TRUSTEES. 149 

APPOINTMENT OF TRUSTEES. 

§ 44. a The creditors of a bankrupt estate shall, 
at their first meeting after the adjudication or after 
a vacancy has occurred in the ofQ.ce of trustee, or 
after an estate has been reopened, or after a com- 
position has been set aside or a discharge revoked, 
or if there is a vacancy in the ofiB.ce of trustee, ap- 
point one trustee or three trustees of such estate. 
If the creditors do not appoint a trustee or trustees 
as herein provided, the court shall do so. 

Appointment of Trustee. 

It is provided by the present act that the creditors, at their 
first meeting, are to appoint either one or three trustees ior 
the estate. And the 47th section directs that when the num- 
ber of trustees shall be three, "the concurrence of two shall be 
necessary to the validity of any act." In regard to the quali- 
fications of persons offering to vote at a meeting of creditors, 
and the majority necessary to the settlement of any matter 
before them, the directions of the statute are to be found in 
section 56. It seems that creditors may vote in person or by 
proxy. But the cases hold that an agent, or attorney at law, 
cannot vote without showing a power of attorney. In re 
Purvis, 1 N. B. E. 163, Fed. Cas. No. 11,476. Corporations 
may vote by their ofQcers or by any person .specially and duly 
authorized. Ex parte Bank of England, 1 Swanst. 10. And 
one partner may prove the claim and cast the vote of his firm, 
but the firm's vote will only count as one vote. In re Purvis, 
1 N. B. R. 16.5, Fed. Cas. No. 11,476; Ex parte Mitchell, 14 
Ves. 597. A preferred creditor may surrender his preference 
(whereby he becomes entitled to prove his claim) and vote for 
trustee. In re Saunders, 13 N. B. R. 164, Fed. Cas. No. 12,371. 
Where only a single creditor appears at the first meeting and 



150 OFFICERS, THKIR DUTIES AND COMPENSATION. (Ch. 5 

proves his debt, the right to choose a trustee belongs to him. 
In re Haynes, 2 N. B. R. 227, Fed. Gas. No. 6,269. In the ease 
of the banlcruptcy of a co-partnership, it is provided by section 
5 of the present act that the trustee or trustees shall be 
chosen by the creditors of the firm. 

Conduct of the Election. 

"No particular mode or manner of voting is prescribed by 
the act. It may be assumed, therefore, that any mode or 
manner of voting by which the choice of each creditor entitled 
to vote is clearly expressed is sufficient. It may, no doubt, 
be taken by ballot or viva voce. It may be taken by calling 
the name of each creditor, or by calling upon the person or 
persons representing creditors by power of attorney to name 
the choice of the creditor or creditors represented by him;" 
Longyear, J., in Ee Lake Superior Ship Canal, Railroad & 
Iron Co., 7 N. B. R. 387, Fed. Cas. No. 7,997. There is no 
such thing known to the law as an informal vote; an expres- 
sion of opinion by the creditors as to their preference is a 
vote. In re Pearson, 2 N. B. E. 477, Fed. Cas. No. 10,878. 
Where one creditor objects to the votes of certain other cred- 
itors, on the ground that such votes have been influenced 
by the bankrupt and are collusive and fraudulent, the ref- 
eree has no power to entertain such objections. In re 
Noble, 3 Ben. 332, Fed. Cas. No. 10,282. 

'Who is Migible as Trustee. 

The attorney for one of the petitioning creditors may be 
chosen trustee of the bankrupt's estate. In re Barrett, 2 
Hughes, 444, Fed. Cas. No. 1,043. So may also a person 
who has been counsel for the bankrupt, it being understood 
that he cannot occupy the position of counsel and trustee at 
the same time. In re Clairmont, 1 N. B. R. 276, Fed. Cas. 
No. 2,781. But the election of a near relative of the bank- 
rupt as trustee is not proper. In re Zinn, 4 N. B. E. 370, 



§ 44) APPOINTMENT OP TRUSTEES. 151 

Fed. Cas. No. 18,216; In re Powell, 2 N. B. R. 45, Fed. Cas. 
Xo. 11,354. The trustee must reside in the district in which 
the proceedings are being carried on. In re Havens, 1 N. 
B. E. 485, Fed. Cas. No. C,231. 

Confirmation of Trustee. 

Under the act of 1867 the choice of an assignee by the 
creditors was made subject to the approval and coniirma- 
tion of the judge. No such provision is explicitly con- 
tained in the present statute. But as it is yet uncertain 
whether the bankruptcy courts may not feel justified in re- 
vising the creditors' action in this respect, we append some 
of the decisions made under the former law. The proper 
rule for the exercise of the judge's discretion in this matter 
is thus stated by Lowell, J.; "The person whom the ma- 
jority in number and value of the creditors choose to be the 
assignee ought to be confirmed, unless disqualified by resi- 
dence out of the district, by personal character, or by some 
interest adverse to that of the body of creditors." In re 
Clairmont, 1 Low. 230, Fed. Cas. No. 2,781. But when the 
register is satisfied that any reasons exist why an assignee 
elected or appointed should not be approved by the judge, 
it is his duty to state such reasons fully in submitting to 
the judge the question of approval. In re Bliss, 1 Ben. 407, 
Fed. Cas. No. 1,543. The bankrupt has a locus standi in 
court to object to the confirmation of trustees of his estate 
chosen at the creditors' meeting. In re McGlynn, 2 Low. 
127, Fed. Cas. No. 8,804. 

Appointment of Trustee iy the Court. 

Where a majority of resident creditors who had been rep- 
resented in a first creditors' meeting, and who had proved 
their claims by attorney, had voted for one person as trus- 
tee, and a majority of creditors who had proved in person 
had voted for another person as trustee, it was held that 
there was no election, and the court was at liberty to ap- 



152 OFXaCERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

point a trustee. In re Portsmouth Sav. Fund Soc, 2 
Hughes, 238, Fed. Cas. No. 11,297. Where no creditor who 
has proved his debt attends at the place and time specified 
in the notice for the first meeting of creditors, the court is 
to appoint a trustee or trustees. In re Cogswell, 1 Ben. 
388, Fed. Cas. No. 2,959. Where, after the death of a trus- 
tee in bankruptcy, evidence of the existence of unadminis- 
tered assets is produced, the court will appoint a new trus- 
tee, notwithstanding that his right to recover such assets 
may be doubtful, depending upon several disputed questions 
of law and fact. A solution of such questions will not be 
attempted on the motion for appointment of a trustee. 
Without that, there is sufQcient ground to justify the ap- 
pointment. In re Mahoney, 5 Fed. 518. 

QUALinCATIONS OT" TRUSTEES. 

§ 45. a Trustees may be (1) individuals -who are 
respectively competent to perform the duties of 
that ofi&ce, and reside or have an ofiB.ce in the judi- 
cial district ■within ivhich they are appointed, or 
(2) corporations authorized by their charters or by 
la-w to act in such capacity and having an office in 
the judicial district within which they are appointed. 



§ 46) DEATH OR REMOVAL OF TRUSTEES. 153 

DEATH OB REMOVAL OE TRUSTEES. 

§ 46. a The death or removal of a trustee shall 
not abate any stiit or proceeding -which he is pros- 
ecuting or defending at the time of his death or re- 
moval, but the same may be proceeded •with, or de- 
fended by his joint trustee or successor in the same 
manner as though the same had been commenced 
or -was being defended by such joint trustee alone 
or by such successor. 

Death of Trustee. 

A cause of action against a trustee in bankruptcy, for 
wrongfully paying the assets in his hands to other creditors 
of the bankrupt than the plaintiff, in disregard of the lat- 
ter's right of priority, does not abate by the death of the 
trustee. U. S. v. Dewey, 39 Fed. 251. 

Hemoval of Trustees. 

The second section of the act, regulating the jurisdiction 
of the courts of bankruptcy, provides that they may re- 
move trustees "for cause," but only after notice to the trus- 
tee proposed to be removed and upon a hearing, and only 
in case complaint is made in that behalf by the creditors. 

When a trustee has failed in properly informing creditors 
in regard to their rights and the value of the assets, and the 
information has been suppressed in the interest of one class 
of creditors, it is the duty of the court to remove him. Ex 
parte Perkins, 5 Biss. 254, Fed. Gas. No. 10,982. A trustee 
of a bankrupt estate petitioned for an order allowing him 
to sell certain securities belonging to the estate for the set- 
tlement of claims against it. A referee being appointed to 
take proofs and report, he recommended that the proposed 
sale and settlement be made. The trustee neglected to ob- 



154 OFFICERS, THEIE DUTIES AND COMPENSATION. (Ch. 5 

tain an order of confirmation, and allowed the securities to 
be taken by creditors of the estate, involving a long litiga- 
tion and delay. It was held that there was suflQcient cause 
for removing the trustee. In re Prouty, 24 Fed. 554. The 
removal of a trustee in bankruptcy by the district court for 
a "cause which in its judgment renders such removal nec- 
essary or expedient" (as expressed in the act of 1867), is not 
such a case or question as can be reviewed by the circuit 
court; it rests wholly in the discretion of the district court. 
In re Adler, 2 Woods, 571, Fed. Gas. No. 82. See In re Blod- 
get, 5 N. B. K. 472, Fed. Gas. No. 1,552. The court, and not 
the referee, is the proper party to entertain a motion to re- 
move a trustee. But it seems that a referee may have a rule 
issued on the trustee to show cause why he should not be re- 
moved. In re Price, 4 N. B. R. 406, Fed. Gas. No. 11,409;. 
In re Stokes, 1 N. B. R. 489, Fed. Gas. No. 13,475. 

DUTIES or TRUSTEES. 

§ 47. a Trustees shall respectively (1) account 
for and pay over to the estates under their control 
all interest received by them upon property of such 
estates; (S) collect and reduce to money the prop- 
erty of the estates for which they are trustees, un- 
der the direction of the court, and close up the 
estate as expeditiously as is compatible with the 
best interests of the parties in interest; (3) deposit 
all money received by them in one of the desig- 
nated depositories; (4) disburse money only by 
check or draft on the depositories in which it has 
been deposited; (6) furnish such information con- 
cerning the estates of which they are trustees and 
their administration as may be requested by parties 
in interest; (6) keep regular accounts showing all 
amounts received and from what sources and all 



§ 47) DUTIES OF TRUSTEES. 155 

amounts expended and on -what accounts; (7) lay 
before the final meeting of the creditors detailed 
statements of the administration of the estates; (8) 
make final reports and file final accounts with the 
courts fifteen days before the days fixed for the 
final meetings of the creditors; (9) pay dividends 
within ten days after they are declared by the 
referees; (10) report to the courts, in writing, the 
condition of the estates and the amounts of money 
on hand, and such other details as may be required 
by the courts, within the first month after their ap- 
pointment and every tw^o months thereafter, un- 
less otherwise ordered by the courts; and (11) set 
apart the bankrupt's exemptions and report the 
items and estimated value thereof to the court as 
soon as practicable after their appointment. 

b Whenever three trustees have been appointed 
for an estate, the concurrence of at least tw^o of 
them shall be necessary to the validity of their 
every act concerning the administration of the 
estate. 

Suits lyy Trustees. 

There are two limitations upon the right of a trustee in 
bankruptcy to bring suits; first, that the thing sought to be 
recovered shall be such as, when recovered, shall be assets 
of the estate; and second, that the action brought shall not 
be an action of tort for damages such as at common law 
is strictly personal and dies with the person. Trustees of 
Mut. Bldg. Fund & Dollar Sav. Bank v. Bossieux, 4 
Hughes, 387, 3 Fed. 817. The trustee represents the rights 
of the creditors and each of them, as well as the bankrupt, 
and may therefore maintain or defend proceedings in regard 
to the bankrupt's estate, which, on grounds of public policy 



156 OFFICERS, THEIR DUJIES AND COMPEKSA.TION. (Ch. 5 

or otherwise, the latter would not be allowed to bring or 
defend. In re St. Helen Mill Co., 3 Sawy. 88, Fed. Cas. No. 
12,222; In re Guriiey, 7 Biss. 414, Fed. Cas. No. 5,873. The 
trustee in bankruptcy of a banking corporation, organized 
under the laws of a state where, by statute, the stockhold- 
ers of such corporation are individually liable for its debts 
to the amount of the stock held by them respectively, can- 
not maintain a bill in equity to enforce such liability 
against the stockholders; for such liability is not in any 
sense a part of the assets of the bankrupt corporation. 
Dutcher v. Bank, 12 Blatchf. 435, Fed. Cas. No. 4,203, 

Appeals and Injunctions. 

The trustee may prosecute a writ of error to reverse a 
judgment or decree rendered against the bankrupt before 
the appointment of the trustee. Jenkins v. International 
Bank, 97 111. 568. But it seems that if the judgment is ren- 
dered before the adjudication, the appeal may be prosecuted 
either in the name of the bankrupt or of the trustee. O'Neil 
T. Dougherty, 46 Cal. 575. Where property in the posses- 
sion of the bankrupt's debtor is claimed by a third person, 
the trustee, may bring a bill in equity against the holder, 
the claimant, and the bankrupt, to obtain a determination 
of their respective rights, and to restrain the claimant from 
prosecuting an action in the state court for the recovery of 
the property. Wilkinson v. Barnard, 9 Ben. 249, Fed. Cas. 
No. 17,669. A gift of personalty by an insolvent husband 
to his wife, without any visible change of possession, does 
not raise such an adverse interest in the wife as to necessi- 
tate a plenary action by the trustee ; he may recover posses- 
sion of the property on summary petition. In re Pierce, 7 
Biss. 420, Fed. Cas. No. 11,139. 

Pleading and Practice in Actions hy Trustees. 

In suing for the recovery of assets, the trustee need not 
aver in his complaint the various steps in the bankruptcy 



§ 47) DUTIES OF TRUSTEES. 157 

proceedings; they are not ultimate but probative facts; the 
pk^ading is good if he alleges ownership in himself, for 
under such allegation he can prove the bankruptcy and his 
own appointment. Dambmann v. White, 48 Cal. 439. But 
if, in suing in trover, he undertakes to set out in detail the 
manner in which he claims to have become the owner of 
the property converted, by alleging the proceedings in bank- 
ruptcy, it is absolutely fatal to his declaration if he omits 
to aver the adjudication. Wright v. Johnson, 8 Blatchf. 
150, Fed. Cas. No. 18,082. But it seems that if he alleges 
the filing of a voluntary petition by the debtor, and the ap- 
pointment of the trustee and assignment to him, the adjudi- 
cation will be understood by necessary implication. Lakin 
V. Bank, 13 Blatchf. S3, Fed. Cas. Nc^ 7,939. An objection 
to a bill in equity in which the complainant describes him- 
self as trustee in bankruptcy, to the effect that he is not le- 
gally such trustee, must be made by i)lea and cannot be 
taken on demurrer. Nicholas v. Murray, 5 Sawy. 320, Fed- 
Cas. No. 10,223. 

To a bill filed by a trustee to set aside a conveyance of 
real and personal property by the bankrupt, as being a fraud 
upon creditors, the bankrupt is not a necessary party. Buf- 
flngton V. Harvey, 95 U. S. 99; Harding v. Crosby, 17 Blatchf. 
348, Fed. Cas. No. 6,050; Fry v. Street, 37 Ark. 39; per con- 
tra, Verselius v. Verselius, 9 Blatchf. 189, Fed. Cas. No. 
16,925. Where two persons jointly purchase property in 
contravention of the bankrupt act, the recovery by the trus- 
tee may be against both for the full value of all the prop- 
erty, though they may have been interested in different pro- 
portions. Schulenburg v. Kabureck, 2 Dill. 132, Fed. Cas. 
No. 12,487. 

Although actions in equity by trustees in bankruptcy are 
not required to be as formal and plenary as equity proceed- 
ings usually are, yet the trustee must pursue the appropri- 
ate remedies, and not resort to equity where the remedy is 



lo8 OFFICERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

at law, nor seek an injunction where the proper course is 
to bring replevin. In re Oregon Iron Works, 4 Sawy. 169, 
Fed. Cas. No. 10,562. Where a transfer of property is held 
void under the bankrupt law as against the trustee, the 
transferee is to be regarded as holding the property in trust 
for the bankrupt's estate, and to be held to account in that 
capacity, and therefore a bill in equity is a proper mode of 
procedure for the trustee in bankruptcy when he seeks to 
recover the property. Schrenkeisen v. Miller, 9 Ben. 55, 
Ted. Cas. No. 12,480. But in another case it is held that 
such a suit is substantially an action of trover, and that the 
trustee must either allege a distinct and actual conversion 
by the creditor, or a demand and refusal to deliver the prop- 
erty, because the rece^)t of the property by the creditor is 
not tortious, nor does it amount per se to a conversion. 
Shuman v. Pleckenstein, 4 Sawy. 174, Fed. Cas. No. 12,826; 
but see Gaytes v. American, 5 Biss. 86, Fed. Cas. No. 5,286. 
A trustee in bankruptcy may maintain ejectment. Bar- 
stow V. Adams, 2 Day (Conn.) 70. Where there has been a 
voluntary general assignment for the benefit of creditors, 
before the adjudication in bankruptcy, the trustee must 
first take proper steps to disaffirm and avoid such assign- 
ment, before he can sustain a claim to money in the hands 
of a debtor of the bankrupt as against the assignee under 
that conveyance. Wehl v. Wald, 18 Blatchf . 163, 3 Fed. 93. 
The trustee stands in no better position than the bank- 
rupt in respect to assets, except in cases of fraud, prefer- 
ence, etc. When, therefore, the bankrupt would be estop- 
ped to deny that a particular chattel in his possession was 
the property of a third person, so will the trustee be estop- 
ped. Ex parte Eockford, K. I. & St. L. R. Co., 1 Low. 345, 
Fed. Cas. No. 11,978. The rule that one who purchases 
pendente lite is bound by the subsequent proceedings ap- 
plies to a trustee in bankruptcy, and to the transfer effected 
by a bankruptcy proceeding. Kimberling v. Hartly, 1 



§ 47) DUTIES OF TRUSTEES. 159 

McCrary, 136, 1 Fed. 571. Although a tenant cannot dis- 
pute his landlord's title, yet when the trustee in bankruptcy 
sues to recover real estate, the tenant of the bankrupt may 
dispute the assignment. Steadman v. Jones, 65 N. 0. 388. 

Liahility of Trustee for JSegligence of His Emplayes. 

In the case of Cardot v. Barney, 63 N. Y. 281, it was held 
that a trustee in bankruptcy of an insolvent railroad corpora- 
tion, who, by direction of the court, is operating the road 
in his official capacity, is not liable to an action for the negli- 
gence of an employ^ resulting in the death of a passenger, 
where it is not shown that he held himself out as a com- 
mon carrier otherwise than in his capacity as an officer of 
the court, and where no personal negligence -is imputable to 
him. But this case, if it decides anything more than that the 
trustee should not be held answerable in his individual ca- 
pacity, is of doubtful authority. It is abundantly settled upon 
the authorities that a receiver in equity, who is operating a 
railroad in that capacity, is liable, in his official character, to 
an action for damages caused by the negligence of his own 
employes; that such an action cannot be brought, during the 
receivership, against the corporation itself; and that the lia- 
bility is a liability of the receivership and to be enforced 
against the funds thereof. Cowderly v. Railroad Co., 93 U. 
S. 352; Little v. Dusenberry, 46 N. J. Law, 614; Newell v. 
Smith, 49 Vt. 255; Hicks v. Eailroad Co., 62 Tex. 38; Blu- 
menthal v. Brainerd, 38 Vt. 402; Meara v. Holbrook, 20 Ohio 
St. 137. And the analogy in this respect between trustees in 
bankruptcy and receivers in equity is so strong and so obvious 
on its face that the decisions last cited are quite as applicable 
to the one case as to the other. 

Sales lyy Trustees. 

The bankrupt law of 1867 conferred express authority upon 
assignees in bankruptcy to make sales of the real and personal 
estate, either on their own motion, in certain cases, or by order 



160 OFFICERS, THEIB DUTIES AND COMPENSATION. (Ch. 5 

and direction of the court, and prescribed the manner and 
effect of such sales. Eev. St. §§ 5062-5005. In the absence 
of such provisions in the present act, the power of a trustee 
to sell the property of the estate must probably be derived from 
the clause requiring him to "collect and reduce to money the 
property of the estate." 

Formalities of the Sale. 

The power of the trustee to sell and convey the bankrupt's 
estate depends wholly upon statute, and a sale in any other 
manner than as therein prescribed would be a nullity. Wisner 
V. Brown, 50 Mich. 553, 15 N. W. 901. Under no circum- 
stances can the bankrupt, after filing his petition and schedule, 
be justified in selling any part of his property without leave 
of the court. In Re Pryor, 4 Biss. 262, Fed. Cas. No. 11,457. 
But it is immaterial who may be the purchaser when the sale 
is properly conducted by the trustee; the bankrupt may him- 
self become the purchaser, and he will take by such purchase 
all the interest which the trustee had to convey. Gates v. 
Fraser, 9 111. App. 624. 

What Interests are not Divested. 

A wife's right of dower is not barred by an assignment 
of the husband's estate under the national bankrupt law and 
a sale thereof by the trustee in bankruptcy by order of court. 
Porter v.Lazear, 109 U. S. 84, 3 Sup. Ct. 58, affirming Lazear 
V. Porter, 87 Pa. St. 513; Smith v. Smith, 5 Ves. 189; In 
re Angier, 10 Am. Law Eeg. (N. S.) 19.0, Fed. Cas. No. 388; 
Kelso's Appeal, 102 Pa. St. 7. A sale by the trustee, whether 
under judicial order or not, dons not divest the lien of the 
state for taxes, unless, in case of a sale ordered by the court, 
the revenue officer or other proper representative of the* state 
is made a party to such order. Meeks v, Whatley, 48 Miss. 
337. 



§ 47) DUTIES OF TRUSTEES. 161 

Sale Free of Incumbrances. 

As stated by Howe, J., in King v. Bowman, 24 La. An. 506, 
"an assignee in bankruptcy may sell, without petition to or 
oi-der of the bankrupt court, any property of the bankrupt in- 
cumbered in any manner. But when he so sells, he sells sub- 
ject to any and all lawful incumbrances, and can convey no 
better or higher interest than the bankrupt could have done." 
But the bankruptcy court has power to order a sale of incum- 
bered property, belonging to the bankrupt, free of all incum- 
brances, and such a sale, if regularly made, will discharge all 
liens and pass an entirely free title to the purchaser. Ray v. 
Norseworthy, 23 Wall. 128; In re Kahley, 2 Biss. 383, Fed. 
Cas. No. 7,593. But in order to the regularity of the pro- 
ceedings it is absolutely essential that the incumbrancer should 
be notified of the proposed sale, or should, in some other way, 
be given an opportunity to appear and show cause "why his 
lien should not be discharged; failing this, the purchaser will 
take subject to the lien. Eay v. Norseworthy, 23 Wall. 128; 
Factors' & Traders' Ins. Co. v. Murphy, 111 U. S. 738, 4 Sup. 
Ct. 679; In re McGilton, 3 Biss. 144, Fed. Cas. No. 8,798. 
An order for such a sale may be made by the court in the 
exercise of its summary jurisdiction, if the order does not 
assume to provide for a determination as to the validity of the 
lien in a summary way and without the consent of the holder. 
In re Kirtland, 10 Blatchf. 515, Fed. Cas. No. 7,851. If 
the proceeds of the sale are insufficient to discharge the elder 
of two mortgages, the purchaser will hold the property free 
of all incumbrances arising from the junior mortgage. Hous- 
ton V. City Bank, 6 How. 486. Where the property is sold free 
of incumbrances, the lien is transferred to the funds in court. 
In re Kahley, 2 Biss. 383, Fed. Cas. No. 7,593. 

Strength of Title Oomoeyed. 

The powers of a trustee in bankruptcy are in no sense ju- 
dicial, and his acts bind only those whom he represents; in 
BL. BANK.— 11 



162 OFFICERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

a sale of the bankrupt's estate he acts only for the creditors 
who prove their claims, and in such matters he can conclude 
the rights of no one else. Second Nat. Bank of Louisville 
V. National State Bank of New Jersey, 10 Bush, 367. The 
purchaser of a bankrupt's real estate at a sale thereof by the 
trustee will hold the title against a prior unrecorded deed 
of the bankrupt. Holbrook v. Dickenson, 56 111. 497. The 
purchaser of a clwse in action from the trustee of a bankrupt 
estate may maintain an action upon it in the trustee's name. 
Eogers v. Stone Co., 134 Mass. 31. 

Revision of Sale hy the Court. 

When a public sale of the real estate is made by the trustee 
under order of court, and the property is struck off to the 
highest bidder, such sale is subject to the approval of the 
court, which has a discretion to refuse to confirm it for mere 
inadequacy of price; it is not necessary that there should be 
fraud or such gross inadequacy of price as to be evidence 
of fraud. In re O'Fallon, 2 Dill. 548, Fed. Cas. No. 10,445. 
So a sale of the bankrupt's estate made to a solicitor of the 
trustee, retained generally in the bankruptcy, will be set aside 
as against public policy. Citizens' Bank v. Ober, 1 Woods, 
80, Fed. Cas. No. 2,731. And see In re Troy Woolen Co., 8 
Blatchf. 465, Fed. Cas. No. 14,201, for other circumstances 
■vyhich will discredit a trustee's sale. The bankruptcy court 
has power, by summary order, to set aside and order to be 
surrendered and cancelled deeds given by the official trustee 
without due authority, or improvidently or irregularly. In re 
Hyde, 19 Blatchf. 115, 6 Fed. 587. In general, the confirma- 
tion by the court of a trustee's sale of land relates back to 
the time of sale, so that the purchaser is entitled to the inter- 
mediate rents and profits as against the trustee; but this rule 
cannot hold in the face of a statute on the subject, and the 
opinion is intimated in Lathrop v. Nelson, 4 Dill. 194, Fed. 
Cas. No. 8,111, that it may yield to countervailing equities 
arising out of special circumstances. 



§ 47) DUTIES OF TRUSTEES. 163 

Deposit of Cash. 

A trustee in bankruptcy who disregards the express order 
of the court in depositing funds of the estate, is liable for 
the interest which the designated depository would have paid. 
In re Newcomb, 32 Fed. 826. And he is also liable, in the ab- 
sence of a reasonable explanation or excuse, for legal interest 
on money collected by him and not deposited, where the same 
remains in his hands for a considerable period of time. In 
re Burt, 27 Fed. 548; In re Thorp, 4 N. Y. Leg. Obs. 337, Fed. 
Cas. No. 14,002; In re Newcomb, 32 Fed. 826. 

Discharge of Trustee. 

A step which in effect puts an end to the bankruptcy pro- 
ceedings ought not to be taken without notice to the cred- 
itors. So, where a trustee sought to renounce his trust by 
making application for his discharge, based on his own a£Q- 
davlt alleging that no tangible assets have come into his hands, 
and that he has no information of any property belonging to 
the bankrupt, other than- a chose in action in favor of the 
estate, held, that notice to creditors of such application, and 
the approval of the court or referee in charge of the case, 
was necessary. In re Savage, 12 Fed. 719. 

Criminal Offenses iy Trustees. 

By reference to section 29 of the act, supra, it will be seen 
that "a person shall be punished, by imprisonment for a period 
not to exceed five years, upon conviction of the offense of hav- 
ing knowingly and fraudulently appropriated to his own use, 
embezzled, spent, or unlawfully transferred any property or 
secreted or destroyed any document belonging to a bankrupt 
estate which came into his charge as trustee." Moreover, if 
a trustee in bankruptcy refuses "to permit a reasonable op- 
portunity for the inspection of the accounts relating to the 
affairs of, and the papers and records of, estates in his 
charge by parties in interest when directed by the court so 



164 OFFICERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

to do," this will constitute an offense which is punishable by 
fine and by forfeiture of the office. See section 29, supra. 



COMPENSATION OP TRUSTEES. 

§ 48. a Trustees shall receive, as full compensa- 
tion for their services, payable after they are ren- 
dered, a fee of five dollars deposited -with the clerk 
at the time the petition is filed in each case, except 
■when a fee is not required from a voluntary bank- 
rupt, and from estates -which they have adminis- 
tered, such commissions on sums to be paid as 
dividends and commissions as may be allow^ed by 
the courts, not to exceed three per centum on the 
first five thousand dollars or less, two per centum 
on the second five thousand dollars or part there- 
of, and one per centum on such sums in excess of 
ten thousand dollars. 

6 In the event of an estate being administered 
by three trustees instead of one trustee or by suc- 
cessive trustees, the court shall apportion the fees 
and commissions between them according to the 
services actually rendered, so that there shall not 
be paid to trustees for the administering of any 
estate a greater amount than one trustee -would be 
entitled to. 

c The court may, in its discretion, -withhold all 
compensation from any trustee -who has been re- 
moved for cause. 



§ 50) BONDS OF REFEREES AND TRUSTEES. 165 

ACCOUNTS AND PAPERS OF TRUSTEES, 

§ 49. a The accounts and papers of trustees shall 
be open to the inspection of o£B.cers and all parties 
in interest. 

BONDS or REFEREES AND TRUSTEES. 

§ 50. a Referees, before assuming the duties of 
their offices, and within such time as the district 
courts of the United States having jurisdiction shall 
prescribe, shall respectively qualify by entering 
into bond to the United States in such sum as shall 
be fixed by such courts, not to exceed five thou- 
sand dollars, Tvith such sureties as shall be approved 
by such courts, conditioned for the faithful per- 
formance of their official duties. 

b Trustees, before entering upon the performance 
of their official duties, and within ten days after 
their appointment, or within such further time, 
not to exceed five days, as the court may permit, 
shall respectively qualify by entering into bond to 
the United States, w^ith such sureties as shall be 
approved by the courts, conditioned for the faith- 
ful performance of their official duties. 

c The creditors of a bankrupt estate, at their 
first meeting after the adjudication, or after a va- 
cancy has occurred in the office of trustee, or after 
an estate has been reopened, or after a composition 
has been set aside or a discharge revoked, if there 
is a vacancy in the office of trustee, shall fix the 
amount of the bond of the trustee ; they may at 
any time increase the amount of the bond. If the 



166 OFFICERS, THEIR DUTIES AND COMPENSATION. (Ch. 5 

creditors do not fix the amount of the bond of the 
trustee as herein provided the court shall do so. 

d The court shall require evidence as to the actual 
value of the property of sureties. 

e There shall be at least t^vo sureties upon each 
bond. 

/ The actual value of the property of the sureties, 
over and above their liabilities and exemptions, on 
each bond shall equal at least the amount of such 
bond. 

g Corporations organized for the purpose of be- 
coming sureties upon bonds, or authorized by \aiw 
to do so, may be accepted as sureties upon the 
bonds of referees and trustees •wrhenever the courts 
are satisfied that the rights of all parties in inter- 
est -will be thereby amply protected. 

h Bonds of referees, trustees, and designated de- 
positories shall be filed of record in the oflB.ce of the 
clerk of the court and may be sued upon in the 
name of the United States for the use of any per- 
son injured by a breach of their conditions. 

i Trustees shall not be liable, personally or on 
their bonds, to the United States, for any penalties 
or forfeitures incurred by the bankrupts under this 
act, of •whose estates they are respectively trustees. 

j Joint trustees may give joint or several bonds. 

k If any referee or trustee shall fail to give bond, 
as herein provided and within the time limited, he 
shall be deemed to have declined his appointment, 
and such failure shall create a vacancy in his ofBce. 

I Suits upon referees' bonds shall not be brought 
subsequent to two years after the alleged breach of 
the bond. 



§ 51) DUTIES OF CLERKS. 167 

m Suits upon trustees' bonds shall not be brought 
subsequent to two years after the estate has been 
closed. 

Bond of Trustee. 

In a case where a trustee in bankruptcy had given a bond 
conditioned for the faithful discharge of his duties in all cases 
in which he might be appointed trustee, it was held that this 
was not sufficient; for the law contemplates that he should 
give a separate and distinct bond for each and every case in 
which he is appointed. In re McFaden, 3 N. B. E. 104, Fed. 
Cas. Xo. 8,785, 

DUTIES OF CLERKS. 

§ 51. a Clerks shall respectively (1) account for, 
as for other fees received by them, the clerk's fee 
paid in each case and such other fees as may be 
received for certified copies of records Tvkich may 
be prepared for persons other than ofi&cers; (2) col- 
lect the fees of the clerk, referee, and trustee in 
each case instituted before filing the petition, ex- 
cept the petition of a proposed voluntary bankrupt 
■which is accompanied by an af&davit stating that 
the petitioner is without, and cannot obtain, the 
money ■with ■which to pay such fees; (3) deliver to 
the referees upon application all papers ■which may 
be referred to them, or, if the offices of such ref- 
erees are not in the same cities or towns as the of- 
fices of such clerks, transmit such papers by mail, 
and in like manner return papers -which w^ere re- 
ceived from such referees after they have been 
used; (4) and -within ten days after each case has 
been closed pay to the referee, if the case was re- 



168 OFFICERS, THEIB DUTIES AND COMPENSATION. (Ch. 5 

ferred, the fee collected for him, and to the trustee 
the fee collected for him at the tim.e of filing the 
petition. 

COMPENSATION OF CLEEKS AND MARSHALS. 

§ 53. a Clerks shall respectively receive as full 
compensation for their service to each estate, a fil- 
ing fee of ten dollars, except -when a fee is not re- 
quired from a voluntary bankrupt. 

b Marshals shall respectively receive from the 
estate where an adjudication in bankruptcy is made, 
except as herein other-wise provided, for the per- 
formance of their services in proceedings in bank- 
ruptcy, the same fees, and account for them in the 
same way, as they are entitled to receive for the 
performance of the same or similar services in 
other cases in accordance with law^s now^ in force, 
or such as may be hereafter enacted, fixing the 
compensation of marshals. 

DUTIES OF ATTORNEY- GENERAL. 

§ 53. a The attorney-general shall annually lay 
before congress statistical tables showing for the 
whole country, and by states, the number of cases 
during the year of voluntary and involuntary bank- 
ruptcy; the amount of the property of the estates; 
the dividends paid and the expenses of administer- 
ing such estates; and such other like information 
as he may deem important. 



§ 54) STATISTICS OF BANKRUPTCY PEOCEEDINGS. 1C9 



STATISTICS OF BANKRUPTCY PROCEEDINGS. 

§ 54. a Officers shall furnish in writing and 
transmit by mail such information as is within 
their know^ledge, and as may be shown by the rec- 
ords and papers in their possession, to the attorney- 
general, for statistical purposes, within ten days 
after being requested by him to do so. 



170 OREDITOKS. CCh. 6 

CHAPTER VI. 

CREDITOES. 
MEETINGS OF CREDITOBS. 

§ 55. a The court shall cause the first meetings 
of the creditors of a bankrupt to be held, not less 
than ten nor more than thirty days after the ad- 
judication, at the county seat of the county in which 
the bankrupt has had his principal place of busi- 
ness, resided, or had his domicile; or if that place 
•would be manifestly inconvenient as a place of 
meeting for the parties in interest, or if the bank- 
rupt is one w^ho does not do business, reside, or 
have his domicile w^ithin the United States, the 
court shall fix a place for the meeting which is the 
most convenient for parties in interest. If such 
meeting should by any mischance not be held vnthin 
such time, the court shall fix the date, as soon as 
may be thereafter, w^hen it shall be held. 

h At the first meeting of creditors the judge or 
referee shall preside, and, before proceeding with 
the other business, may allow^ or disallow the 
claims of creditors there presented, and may pub- 
licly examine the bankrupt or cause him to be ex- 
amined at the instance of any creditor. 

c The creditors shall at each meeting take such 
steps as may be pertinent and necessary for the 
promotion of the best interests of the estate and the 
enforcement of this act. 

d A meeting of creditors, subsequent to the first 
one, may be held at any time and place when all 



§ 56) VOTERS AT MEETINGS OP CREDITORS. 171 

of the creditors -who have secured the allowance of 
their claims sign a 'written consent to hold a meet- 
ing at such time and place. 

e The court shall call a meeting of creditors -when- 
ever one-fourth or more in number of those who 
have proven their claims shall file a w^ritten re- 
quest to that effect; if such request is signed by a 
majority' of such creditors, which number repre- 
sents a majority in amount of such claims, and 
contains a request for such meeting to be held at 
a designated place, the court shall call such meet- 
ing at such place w^ithin thirty days after the date 
of the filing of the request. 

/ Whenever the affairs of the estate are ready to 
be closed a final meeting of creditors shall be or- 
dered. 

VOTERS AT MEETINGS OF CREDITORS. 

§ 56. a Creditors shall pass upon matters sub- 
mitted to them at their meetings by a majority vote 
in number and amount of claims of all creditors 
whose claims have been allowed and are present, 
except as herein otherwise provided. 

6 Creditors holding claims w^hich are secured or 
have priority shall not, in respect to such claims, 
be entitled to vote at creditors' meetings, nor shall 
such claims be counted in computing either the 
number of creditors or the amount of their claims, 
unless the amounts of such claims exceed the val- 
ues of such securities or priorities, and then only 
for such excess. 



172 CREDITORS. (Oh. 6 

PROOF AND ALLOWANCE OF CLAIMS. 

§ 57. a Proof of claims shall consist of a state- 
ment under oath, in writing, signed by a creditor, 
setting forth the claim, the consideration therefor, 
and whether any, and, if so what, securities are 
held therefor, and whether any, and, if so w^hat, 
payments have been made thereon, and that the 
sum claimed is justly owing from the bankrupt to 
the creditor. 

h Whenever a claim is founded upon an instru- 
ment of w^riting, such instrument, unless lost or 
destroyed, shall be filed with the proof of claim. 
If such instrument is lost or destroyed, a statement 
of such fact and of the circumstances of such loss 
or destruction shall be filed under oath with the 
claim. After the claim is allo-wed or disallow^ed, 
such instrument may be withdrawn by permission 
of the court, upon leaving a copy thereof on file 
with the claim. 

c Claims after being proved may, for the purpose 
of allow^ance, be filed by the claimants in the court 
w^here the proceedings are pending, or before the 
referee if the case has been referred. 

d Claims w^hich have been duly proved shiiU be 
allowed, upon receipt by or upon presentation to 
the court, unless objection to their allow^ance shall 
be made by parties in interest, or their considera- 
tion be continued for cause by the court upon its 
ow^n motion. 

e Claims of secured creditors and those who have 
priority may be allowed to enable such creditors 
to participate in the proceedings at creditors' meet- 



§ 57) PROOF AND ALLOWANCE OF CLAIMS. 173 

ings held prior to the deterraiuatiou of the value 
of their securities or priorities, but shall be allowed 
for such sums only as to the courts seem to be o-w- 
ing over and above the value of their securities or 
priorities. 

/ Objections to claims shall be heard and deter- 
mined as soon as the convenience of the court and 
the best interests of the estates and the claimants 
will permit. 

g The claims of creditors who have received pref- 
erences shall not be allow^ed unless such creditors 
shall surrender their preferences. 

h The value of securities held by secured creditors 
shall be determined by converting the same into 
money according to the terms of the agreement 
pursuant to which such securities w^ere delivered 
to such creditors or by such creditors and the 
trustee, by agreement, arbitration, compromise, or 
litigation, as the court may direct, and the amount 
of such value shall be credited upon such claims, 
and a dividend shall be paid only on the unpaid 
balance. 

i Whenever a creditor, whose claim against a 
bankrupt estate is secured by the individual under- 
taking of any person, fails to prove such claim, 
such person may do so in the creditor's name, and 
if he discharge such undertaking in whole or in 
part he shall be subrogated to that extent to the 
rights of the creditor. 

j Debts ow^ing to the United States, a state, a 
county, a district, or a municipality as a penalty 
br forfeiture shall not be allow^ed, except for the 
amount of the pecuniary loss sustained by the act, 
transaction, or proceeding out of w^hich the penalty 



174 CKEDITOKS. (Ch. 6 

or forfeiture arose, ■with reasonable and actual costs 
occasioned thereby and such interest as may have 
accrued thereon according to la-w. 

k Claims -which have been allowed may be recon- 
sidered for cause and reallow^ed or rejected in w^hole 
or in part, according to the equities of the case, 
before but not after the estate has been closed. 

I Whenever a claim shall have been reconsidered 
and rejected, in Tvhole or in part, upon ■which a 
dividend has been paid, the trustee may recover 
from the creditor the amount of the dividend re- 
ceived upon the claim if rejected in -whole, or the 
proportional part thereof if rejected only in part. 

m The claim of any estate ■which is being admin- 
istered in bankruptcy against any like estate may 
be proved by the trustee and allo-wed by the court 
in the same manner and upon like terms as the 
claims of other creditors. 

n Claims shall not be proved against a bankrupt 
estate subsequent to one year after the adjudica- 
tion ; or if they are liquidated by litigation and the 
final judgment therein is rendered within thirty 
days before or after the expiration of such time, 
then within sixty days after the rendition of such 
judgment: provided, that the right of infants and in- 
sane persons -without guardians, ■without notice of 
the proceedings, may continue six months longer. 

Proof of Claims; Formal Requisites of Proof . 

The statement of the debt in the schedule is not a proof of 
it. It may be stated in fraud, and may not exist. The bank- 
rupt may have made payments, or may have counterclaims 
or offsets. The debt must be proved by the oath of the cred- 
itor. This applies to lien creditors as well as unsecured cred- 



§ 57) PROOF AND ALLOWANCE OF CLAIMS. 175 

iters. In re Davis, 2 N. B. R. 392, Fed. Cas. No. 3,618. 
Similarly, the finding, in a decree of adjudication in involun- 
tary bankruptcy, that the petitioning creditor has a valid and 
provable claim to the amount of |250, is not conclusive up- 
on the trustee and creditors, so as to dispense with proof of 
debt of the petitioning creditor, or to preclude questioning 
his right to participate in the distribution of the estate. In 
re Cleveland Ins. Co., 22 Fed. 200. A proof of debt cannot 
be filed unless it is correctly entitled in the cause. In re 
Walther, 14 N. B. K. 273, Fed. Cas. No. 17,126. A proof 
against a firm should state that the firm or company, describ- 
ing it by the firm name and the individuals who composed it, 
was indebted to the creditor and how and in what amount; 
it should not be left in uncertainty whether the demand is a 
firm debt or a joint claim against the individual partners. 
In re Walton, Deady, 510, Fed. Cas. No. 17,129. "A proof 
of debt is not open to objection because it appears on its 
face that the statute of limitations, if set up, would be a good 
defense to the claim. The proof of claim need not anticipate 
the defense, or give proof of facts to take the case out of the 
statute." Blatchford, J., in Ee Knoepfel, 1 Ben. 402, Fed. 
Cas. No. 7,892. Upon proof of a claim in bankruptcy the 
'particulars of the consideration must be given in the state- 
ment. In re Elder, 1 Sawy. 73, Fed. Cas. No. 4,326. Where 
the bankrupt is dead, the proving creditor is nevertheless a 
competent witness in his own behalf to prove the contract 
out of which his claim arose; the case falls under Rev. St. § 
858. In re Merrill, 9 Ben. 165, Fed. Cas. No. 9,466. In mak- 
ing proof of a claim the creditor's Christian name ought to 
appear in the documents offered in evidence or in the record 
of the proceeding, and it is not sufttcient that the initials of 
the creditor's name appear. In re Valentine, 4 Biss. 317, 
Fed. Cas. No. 16,812. 



176 CEEDITOES. (Ch. 6 

TFAo May make Proof. 

A creditor cannot prove by an attorney testifying upon in- 
formation and belief, unless the creditor is prevented from 
making the affidavit as provided in the act. In re Barnes, 1 
Low. 560, Fed. Cas. No. 1,012. A proof of debt taken be- 
fore a notary public who is the attorney and solicitor of rec- 
ord for the bankrupt will not be allowed to be filed. In re 
Keyser, 9 Ben. 224, Fed. Cas. No. 7,748. The assignee of a 
non-negotiable chase im, action may prove it against the es- 
tate of the debtor in bankruptcy upon his own deposition, 
and it is not necessary to the sufficiency of the proof that the 
deposition of the assignor should be added. Ex parte Daven- 
port, 1 Low. 384, Fed. Cas. No. 3,586. The proof of a claim 
by a state should be made by the state treasurer or by some 
officer holding a relation to the state similar to that which 
a president, cashier, or treasurer bears to the corporation of 
which he is such officer. In re Corn Exch. Bank, 15 N. B. R. 
216, Fed. Cas. No. 3,243, A creditor who resides out of the 
district where the bankruptcy proceedings are taken, sub- 
jects himself to the jurisdiction of the court by proving his 
debt, and is thereafter bound to obey all the orders of the 
court touching his alleged debt, and the court, in case he dis- 
obeys its orders, can deprive him of all the benefits of the 
act, and can reject and expunge his claims. In re Kyler, 2 
Ben. 414, Fed. Cas. No. 7,956. Where an indorsee of a note 
has proved his claim against the estate of the maker in bank- 
ruptcy, and afterwards, pending the bankruptcy proceedings, 
receives payment from the indorser, his relation to the lia- 
bility ceases, he can no longer be considered a creditor of 
the maker, and he can take no further part in the proceed- 
ings; but the indorser is subrogated to his rights in respect 
to the demand, and it belongs to him to participate, in that 
capacity, in the further proceedings. In re Broich, 7 Biss. 
303, Fed. Cas. No. 1,921. 



§ 57) PROOF AND ALLOWANCE OF CLAIMS.. 177 

Whenfi Proof must he Made. 

A creditor may come in at any time before tlie hearing ot 
the petition for the bankrupt's discharge and prove his claim. 
In re Longest, 7 Biss. 477, Fed. Cas. No. 8,485. In a case 
where, after the third meeting of creditors and the bank- 
rupt's discharge, about five years elapsed, and then some as- 
sets were realized unexpectedly, and a fourth meeting was 
called, it was held that a creditor having a just debt might 
prove it at this meeting and receive a dividend, not disturb- 
ing the former dividends. In re Robinson, 2 Low. 326, Fed.. 
Cas. No. 11,941. 

Withdrawal and Amendment of Proofs. 

A creditor who has proved his debt in bankruptcy may be^ 
permitted to withdraw his proof, if it was made under a mis- 
take of fact or law, provided neither the bankrupt nor the 
other creditors who have proved will be injured thereby. In 
re Hubbard, 1 Lowell, 190, Fed. Cas. No. 6,813. It was so held 
where the attorney, through a mistake of mixed fact and law, 
had prepared the proofs as unsecured claims. , The creditors 
were permitted to withdraw their proofs upon terms of in- 
demnity to the estate. In Re Baxter, 12 Fed. 72. A secured 
creditor, who inadvertently proves his debt as an unsecured 
claim, will not be required to surrender his lien and parti- 
cipate in the general distribution, but may be allowed to 
withdraw and amend his proofs. In re Brand, 3 N. B. R. 
324, Fed. Cas. No. 1,809. 

Postponement of Proofs. 

When there is a reasonable and substantial doubt in the- 
mind of the referee as to the validity of any claim and as to. 
the right of the alleged creditor to prove it, he may postpone 
'the proof of such claim until after the election of a trustee. 
In re Jackson, 7 Biss. 280, Fed. Cas. No. 7,123. Where a re- 
view by the district judge of the action of the referee in such 

BL. BAN1<:.-12 



178 CEEDITOES. (.Ch. G 

cases is sought, the better practice on the part of creditors 
who object to such postponement of their claims is to have 
the objection noted, obtain a stay of proceedings, and have 
the case certified before any further action is taken before 
the referee. Id. ; and see In re Stevens, 4 Ben. 513, Fed. Cas. 
No. 13,.391. 

Proof iy Preferred Creditors. 

Under the act of 1867 it was held, that where the trustee 
sues a preferred creditor to recover property alleged to have 
been sold or conveyed to him by the bankrupt in fraud of the 
act, and the creditor denies his liability, resists a recovery, 
goes to trial, and judgment is rendered against him, such 
judgment conclusively establishes that the creditor sought to 
obtain a fraudulent preference, and disentitles him to prove 
up that claim; and if he pays such judgment under execu- 
tion, this is not a "surrender" under the act, and will not 
enable him to prove his debt. In re Eichter's Estate, 1 Dill. 
544, Fed. Cas. No. 11,803; In re Leland, 7 Ben. 156, Fed. Cas. 
No. 8,230; In re Drummond, 4 Biss. 149, Fed. Cas. No. 4,094; 
In re Stephens, 3 Biss. 187, Fed. Cas. No. 13,365, and see In 
re Graves, 9 Fed. 816. But in a case where the assets were 
sufiQcient to pay all the other creditors in full and leave a 
surplus, it was held that a preferred creditor from whom his 
advantage had been wrested by compulsion of legal process, 
might make proof of his debt and be paid out of such sur- 
plus; for as between the bankrupt and himself he was en- 
titled to the money. In re Mcduire, 8 Ben. 452, Fed. Cas. 
No. 8,813. And where the fraud is merely constructive, a 
mortgagee who has taken the mortgaged property and held 
;it until a trial and finding against him in favor of the trus- 
tee, but who then, and before judgment, surrenders the prop- 
erty, may be allowed to prove his debt. Burr v. Hopkins, 6 
Biss. 355, Fed. Cas. No. 2,192. A creditor who \iss, never ac- 
xqjted a deed of trust made to a third person, the enforce- 



§ 57) PUUOK AND ALI-OWANl'K OF CLAIMS. 179 

ment of which would give him a preference, and who dis- 
claims all interest in it, mav prove his debt as unsecured. 
In re Saunders, 2 Lowell, 444, Fed. Cas. No. 12,.n71. If the 
principal creditor has lost the right to prove his claim, by 
reason of accepting a preference and refusing to surrender 
it, neither can the guarantors prove. In re Ayers, 6 Biss. 
48, Fed. Cas. No. 685: "When a creditor has two or more 
separate and disconnected debts, receiving a fraudulent pref- 
erence as to some one or more only will not affect his right 
to prove those as to which no preference has been received, 
and to receive dividends thereon. So, where a creditor has 
separate and disconnected debts as to which he has received 
separate and distinct fraudulent preferences, he may surren- 
der as to some and prove and receive dividends as to them 
without surrendering as to the others." In re Holland, 8 N. 
B. E. 190, Fed. Cas. No. 6,604; Longyear, J. A mere repay- 
ment to the debtor cannot take the place of a surrender to 
the trustee. In re Currier, 13 N. B. R 68, Fed. Cas. No. 3,492. 
A return of part payments, as a condition of proof of debt, 
is not required, except upon the concurrence of an intent in 
the bankrupt, when the payment was made, to create a pref- 
erence, with knowledge of his unlawful intent by the cred- 
itor. In re Baxter, 25 Fed. 700. 

Power to Expunge Proofs. 

It is the policy of the act to do equal and exact justice be- 
tween the estate of the bankrupt and the creditors. The 
court has ample power to investigate a claim at any stage of 
the proceedings, and to make any correction that equity and 
justice demand; not only to reduce the amount if it is too 
large, but also to increase it if, through inadvertence, it is 
smaller than by right it should be. Questions of amendment 
address themselves to the equitable consideration of the court, 
and great discretion is exercised in disposing of them. In re 
Montgomery, 3 Ben. 567, Fed. Cas. No. 9,727. It is compe- 



180 CREDITORS. (Ch. 6 

tent for' the court to correct any mere mistake, and to allow 
the proof to stand for any sum that, upon examination, is 
found to be actually due. In re New Brunswick Carpet Co., 
4 Fed. 514. A proof of a judgment which is subsequently 
set aside should be expunged. In re Bruce, 6 Ben. 515, Fed. 
Cas. Ko. 2,(144. Where, upon a long re-examination of a 
creditor's proof of debt, the claim, as made, is disproved in 
form and substance, it should be expunged. In re Mead, 14 
Fed. 2ST. Where the claim, after being proved, is discov- 
ered to have been founded upon an illegal or gaming con- 
tract, the proof thereof may be expunged on motion of the 
trustee. In re Green, 7 Biss. 338, Fed. Cas. Xo. 5,751. So 
the court has power to refer to the referee a petition of a 
creditor praying that a proof of claim of another creditor be 
expunged on account of matters occurring since the claim 
was proved. In re Loring, Holmes, 483, Fed. Cas. Xo. 8,512. 
The bankrupt himself is a competent party to move the ex- 
jjunction of a creditor's proof. In re McDonald, 14 X. B. E. 
477, Fed. Cas. Xo. 8,753. The burden of showing that a 
claim, duly proven according to the provisions of the stat- 
ute, is founded in mistake or fraud, lies upon the trustee or 
the creditor attacking the proof. After such proof, the claim 
is prima facie good. In re Felter, 7 Fed. 904. The court 
has the power to pass an order requiriDsr the creditor to show 
cause why proof should not be vacated and annulled; but 
such power does not appertain to the referee. Comstock v. 
Wheeler, 2 N. B. E. 561, Fed. Cas. Xo. 3,084. A referee need 
not give notice to either party of his findings and decision on 
a proceeding to re-examine and expunge a claim. In re 
Pease, 29 Fed. 593. 

Appeal from Rejection of Claim. 

Where a proof of debt is disallowed by the district court, 
and an appeal taken to the circuit court of appeals, the cause 
of action prosecuted in the latter court must be the same 



§ o8) NOTICES TO CREDITORS. hSl 

one that was rejected by the former, and it is not pci'mis- 
sible, under cover of an appeal, to transform the claim into a 
new and distinct cause of action. In re Jaycox, 12 Blatchf. 
209, Fed. Gas. No. 7,12:;7. 

NOTICES TO CREDITORS. 

§ 58. a Creditors shall have at least ten days' 
notice by mail, to their respective addresses as they 
appear in the list of creditors of the bankrupt, or 
as after-wards filed with the papers in the case by 
the creditors, unless they ■waive notice in writing, 
of (1) all examinations of the bankrupt; (2) all hear- 
ings upon applications for the confirmation of com- 
positions or the discharge of bankrupts ; (3) all 
meetings of creditors ; (4) all proposed sales of prop- 
erty; (5) the declaration and time of payment of 
dividends ; (6) the filing of the final accounts of the 
trustee, and the time when and the place where 
they w^ill be examined and passed upon; (7) the 
proposed compromise of any controversy, and (8) 
the proposed dismissal of the proceedings. 

6 Notice to creditors of the first meeting shall be 
published at least once and may be published such 
number of additional times as the court may di- 
rect ; the last publication shall be at least one week 
prior to the date fixed for the meeting. Other no- 
tices may be published as the court shall direct. 

c All notices shall be given by the referee, unless 
otherwise ordered by the judge. 



lii'Z CREDITORS. (Ch. 6 

WHO MAY PILE AND DISMISS PETITIONS. 

§ 59. a Any qualified person may file a petition 
to be adjudged a voluntary bankrupt. 

& Three or more creditors who have provable 
claims against any person -which amount in the 
aggregate, in excess of the value of securities held 
by them, if any, to five hundred dollars or over ; 
or if all of the creditors of such person are less than 
tAvelve in number, then one of such creditors 
whose claim equals such amount may file a petition 
to have him adjudged a bankrupt. 

c Petitions shall be filed in duplicate, one copy 
for the clerk and one for service on the bankrupt. 

d If it be averred in the petition that the credit- 
ors of the bankrupt are less than tw^elve in num- 
ber, and less than three creditors have joined as 
petitioners therein, and the answer avers the ex- 
istence of a larger number of creditors, there shall 
be filed w^ith the answ^er a list under oath of all 
the creditors, w^ith their addresses, and thereupon 
the court shall cause all such creditors to be noti- 
fied of the pendency of such petition and shall de- 
lay the hearing upon such petition for a reasonable 
tim.9, to th3 end that parties in intsreat shall have 
an opportunity to be heard; if upon such hearing 
it shall appear that a sufficient number have joined 
in such petition, or if prior to or during such hear- 
ing a sufficient number shall join therein, the case 
may be proceeded with, but otherwise it shall be 
dismissed. 

e In computing the number of creditors of a 
bankrupt for the purpose of determining how many 



§ 59) ■ WHO MAY FILE AND DISMISS PKTITIONS. 183 

creditors must join in the petition, such creditors 
as were employed by him at the time of the filings 
of the petition or are related to him by consan- 
guinity or afl&nity within the third degree, as deter- 
mined by the common law, and have not joined in 
the petition, shall not be counted. 

/ Creditors other than original petitioners may 
at any time enter their appearance and join in the 
petition, or file an answer and be heard in opposi- 
tion to the prayer of the petition. 

g A voluntary or involuntary petition shall not 
be dismissed by the petitioner or petitioners or for 
w^ant of prosecution or by consent of parties until 
after notice to the creditors. 

What creditors may petition. 

Attaching creditors are not to be counted, nor their claims 
computed, in ascertaining whether the petition in involuntary 
bankruptcy is supported by the requisite number and amount 
of creditors. In re Jewett, 7 Biss. 242, Fed. Cas. No. 7,305; 
In re Hazens, 4 Dill. 549, Fed. Cas. No. 6,285; In re Scraf- 
ford, 4 Dill. 376, Fed. Cas. No. 12,556. A creditor who has 
been fraudulently preferred cannot proceed for adjudication 
against his debtor for the very act of preference to which he 
was a party; he is estopped on every principle of equity; and 
therefore he ought not to be reckoned in computing the num- 
ber or amount of creditors who have or have not petitioned. 
In re Currier, 2 Lowell, 436, Fed. Cas. No. 3,492; In re Israel, 
3 Dill. 511, Fed. Cas. No. 7,111; see, however, a somewhat 
different opinion expressed in Ccxe v. Hale, 10 Blatchf. 56, 
Fed. Cas. No. 3,310. It is important to observe that the pres- 
ent act authorizes secured creditors to be petitioners in re- 
spect to the excess of their demand over the security; a 
permission not accorded by previous statutes. In re Creen 
Pond K. E. Co., 13 N. B. R. 118, Fc'd. Cas. No. 5,TS3. Where 



-184 CEEDiToiis. (Ch. 6 

a creditor has released his debt, but was induced to do so by 
the fraudulent representations of another creditor, who sought, 
by this means, to get possession of the whole property and 
so obtain a preference, which plan was effected, the first 
creditor may repudiate his own release and file a petition 
against the common debtor. ' Michaels v. Post, 21 Wall. 398. 
It has been held to be no defense to a petition in compulsory 
bankruptcy that the petitioning creditor is the only creditor 
of the alleged bankrupt. In re Alexander, 1 Lowell, 470, Fed. 
Cas. No. 161. But where a single creditor, whose debt is 
fully secured on real estate, presents a petition, this is not re- 
garded as a case coming within the scope and intent of the 
act, and the court will not take jurisdiction. In re Johann, 2 
Biss. 139, Fed. Cas. No. 7,331. Lawful solicitation by a debtor 
to induce his creditors to sign a petition against him in in- 
voluntary bankruptcy is permissible. In re Bouton, 5 Sawy. 
427, Fed. Cas. No. 1,706; and see Sanford v. Huxford, 32 
,Mo. 313. While of course the debtor himself cannot legally 
bribe his creditors to forbear instituting proceedings against 
him, yet there is nothing in the bankrupt law which forbids 
a creditor to take from a third person a contract or security for 
the payment of money as an inducement to refrain from 
throwing his debtor into bankruptcy. Ecker v. Bohn, 45 Md. 
278. And conversely, a party, if he acts in good faith, may 
purchase a claim in order to join in an involuntary petition 
and make up the necessary number of creditors. In re Wood- 
ford, 13 N. B. E. 575, Fed. Cas. No. 17,972. The same num- 
ber and amount of creditors must join in a proceeding to force 
a corporation into bankruptcy as are required in the case of an 
individual. In re Leavenworth Sav. Bank, 14 N. B. R. 92, 
Fed. Cas. No. 8,165; In re Oregon B. & P. Co., 10 Pac. 
Law Eep. 103. 



§ 59) WHO MAY FILE AND DISMISS PETITIONS. 1S5 

Hequisites as to JVumber and Amount. 

There is some conflict of opinion as to whether the suffi- 
ciency of the number and amount of creditors joining in the 
petition is a jurisdictional fact or not. Thus, it was held, in 
In re Scammon, 6 Biss. 130, Fed. Cas. No. 12,427, that it is so 
far a jurisdictional fact that the petition must show affirm- 
atively that the requisite number of creditors join therein ; that 
euch averment is necessary before the debtor can be required 
to show cause, or even to file a schedule. And this view is 
supported by In re Burch, 10 N. B. R. 150, Fed. Cas. No. 2,138, 
and In re Rosenflelds, 11 N. B. E. 86, Fed. Cas. No. 12,061. 
On the other hand, it is squarely denied in In re Henderson, 9 
Fed. 196, and Exparte Jewett, 2 Lowell, 393, Fed. Cas. No. 
7,303. Probably the true solution is found in accepting the 
doctrine of In re Scammon, as above, while yet admitting the 
force of In re Duncan, 8 Ben. 365, Fed. Cas. No. 4,131, which 
is to the effect that, the requisite number and amount of cred- 
itors appearing on the face of the proceedings to have joined, 
the fact cannot be re-examined, or the judgment of the court 
thereon attacked, either directly or collaterally, except for 
fraud. To same effect see In re Funkenstein, 3 Sawy. 605, 
Fed. Cas. No. 5,158. The allegation may be upon informa- 
tion and belief. In re Scammon, 6 Biss. 130, Fed. Cas. No. 
12,427. Whereas it is required that the demands of the 
petitioning creditors should amount to a certain sum, it is 
not necessary that the principal of the debts should reach that 
sum; interest, evidently due on the face of the petition," may 
be added in for this purpose. Sloan v. Lewis, 22 Wall. 150. 
The law does not require the court, in its adjudication of 
bankruptcy, formally to pass upon the question whether the 
requisite proportion of creditors, in number and the amount 
of their claims, have joined in the petition; if the defendant 
desires to contest this point, he should do it in the manner 
prescribed in the act. Lastrapes v. Blanc, 3 Woods, 134, Fed. 
Cas. No. 8,100. It was said that "although the law does not 



186 CKEDITOES. (Ch. 6 

expressly require that the list of creditors preseDted by the 
debtor, in denial that the requisite number and amount have 
joined in the petition, should be sworn to by him, the gen- 
eral intent of the act would seem to indicate that it should be 
done." In re Steinman, 6 Biss. 166, Fed. Cas. No. 13,357. And 
this is now expressly required by the act. 

Petitioning Creditors cannot Withdraw. 

Creditors who have joined in a petition cannot afterwards 
be allowed to withdraw from the proceedings; because such 
a practice would lead to underhand and secret negotiations be- 
tween the debtor and a portion of his creditors at the expense 
of the others. In re Heifron, 6 Biss. 156, Fed. Cas. No. 6,321; 
In re Vogel, 9 Ben. 498, Fed. Cas. No. 16,981; In re Sargent, 
13 N. B. E. 144, Fed. Cas. No. 12,361. But when a creditor's 
name has been used in the petition without his knowledge or 
consent, he may repudiate the proceedings, and the petition 
will be dismissed as to him. In re Rosenflelds, 11 N. B. E. 86, 
Fed. Cas. No. 12,061; In re Sargent, 13 N. B. E. 144, Fed. 
Cas. No. 12,361. 

Who may intervene. 

When, on the return day of a rule to show cause in involun- 
tary bankruptcy, the petitioning creditors fail to appear or to 
proceed, any creditors to the required amount may intervene, 
and pray an adjudication on the original petition. In re 
Sheffer, 4 Sawy. 363, Fed. Cas. No. 12,742; In re Lacey, 12 
Blatchf. 322, Fed. Cas. No. 7,965. This right of intervention 
is secured to creditors, and no settlement or arrangement by 
which the petitioning creditor seeks to withdraw his petition 
can defeat it. In re Lacey, supra. But to entitle a creditor to 
join an involuntary petition he must have a debt provable im- 
mediately; a promissory note indorsed by the debtor, not fall- 
ing due until after the petition is filed, is not such a debt. 
In re Morse, 17 Blatchf. 72, Fed. Cas. No. 9,851, 



§ 00) PEEi'ERRED CREDITORS. 187 



PREFERRED CREDITORS. 

§ 60. o A person shall be deemed to have given 
a preference if, being insolvent, he has procured 
or su£fered a judgment to be entered against him- 
self in favor of any person, or made a transfer of 
any of his property, and the effect of the enforce- 
ment of such judgment or transfer -will be to ena- 
ble any one of his creditors to obtain a greater 
percentage of his debt than any other of such credit- 
ors of the same class. 

6 If a bankrupt shall have given a preference 
■within four months before the filing of a petition, 
or after the filing of the petition and before the ad- 
judication, and the person receiving it, or to be 
benefited thereby, or his agent acting therein, shall 
have had reasonable cause to believe that it ■was 
intended thereby to give a preference, it shall be 
voidable by the trustee, and he may recover the 
property or its value from such person. 

c If a creditor has been preferred, and after-wards 
in good faith gives the debtor further credit -with- 
out security of any kind for property -which be- 
comes a part of the debtor's estates, the amount of 
such ne^w credit remaining unpaid at the time of 
the adjudication in bankruptcy may be set oflf 
against the amount ■which -would otherwise be re- 
coverable from him. 

d If a debtor shall, directly or indirectly, in con- 
templation of the filing of a petition by or against 
him, pay money or transfer property to an attor- 
ney and counselor at law, solicitor in equity, or 
proctor in admiralty for services to be rendered, 



188 CREDITORS. (Ch. 6 

the transaction shall be reexamined by the court 
on petition of the trustee or any creditor and shall 
only be held valid to the extent of a reasonable 
amount to be determined by the court, and the ex- 
cess may be recovered by the trustee for the bene- 
fit of the estate. 

Preferences. 

A preference, within the meaning of the bankrupt law, is 
an advantage in the payment of the debt due him, acquired 
by one creditor over the other- creditors of the same debtor. 
In re Horton, 5 Ben. 562, Fed. Cas. No. 6,707. Hence a pay- 
ment, by an insolvent debtor, of a percentage on claims of a 
part of his creditors, which does not have the effect to lessen 
the percentage which his other creditors will receive, is not 
an unlawful preference. In re Hapgood, 2 Low. 200, Fed. 
■Cas. No. 6,044. And a mere promise of security, in which 
no specific property is pledged, is not sujOScient to establish 
a preference. Southwick v. Whipple, 2 Fed. 773. And a 
transfer, by one in failing circumstances, of the greater por- 
tion of his assets to a creditor, is not void as involving an un- 
lawful preference of such creditor, where all known creditors, 
and all whom the grantee suspected were creditors, and all 
the creditors of whose existence he was bound to know, joined 
in the arrangement under which the transfer was made, 
though such creditor thereby in fact secured a preference. 
Judson V. Courier Co., 8 Fed. 422. But the fact that a bank- 
rupt received money or property upon an unlawful contract, 
under which a creditor sought a preference, which property 
went to increase the estate, will not render such contract 
valid. Adams v. Merchants' Bank, 2 Fed. 174. A creditor 
of a bankrupt cannot obtain a preference of his debt by pur- 
chasing the property of the bankrupt through the interven- 
tion of an agent, and tendering the notes of the bankrupt in 
payment. Fleming v. Andrews, 3 Fed. 632. 



§ HO) PEEFERHED CREDITORS. ISO- 

Deed of Trust. 

Under the former bankrupt law it was held to be necessary 
that the following things should concur in order to render 
a deed of trust invalid : It must have been executed within 
two months (now four) of the filing of a petition in bank- 
ruptcy against the grantor; the bankrupt must have been 
insolvent, or it must have been made in contemplation of 
insolvency; the deed of trust must have been made with a 
view to give a preference; the party to whom it was made 
must have had reasonable cause to believe that the bank- 
rupt was insolvent at the time, and must have known that 
the deed of trust was made in fraud of the bankrupt law. 
May V. Le Claire, 18 Fed. 164. 

Assignments for Creditors. 

"An assignment to a trustee of all a trader's property in- 
trust for the benefit of his creditors, which necessarily puts; 
an end to the business of the debtor, and which gives a pref- 
erence to some creditors over others, is made out of the usual,, 
ordinary course of business, and, if made in contemplation 
of insolvency, is not only prima fade but conclusive evidence 
of an intent on the part of the debtor to defeat the operation 
of the bankrupt act, and is therefore void." Woods, J., ini 
Jackson v. McCulloch, 13 N. B. E. 284, Fed. Cas. No. 7,140. 
But where the assionment is made in good faith and for the- 
equal and common benefit of all creditors, there is some dif- 
ference of opinion as to its constituting a preference. The- 
case of Globe Ins. Co. v. Cleveland Ins. Co., 14 N. B. E. 311, 
Fed. Cas. No. 5,486, may be regarded as settling the question-, 
in the affirmative; though see Haas v. O'Brien, 66 N. Y. 597.. 

Procuring or Suffering Judgment. 

In order to constitute a preference under this clause, the 
debtor must do some act to facilitate the proceedings. Sub- 
missive inactivity is not enough. The leading case on the- 



190 CREDITORS. (Ch. 6 

subject (Wilson v. City Bank, 17 Wall. 488), says: "Some- 
thing more than passive non-resistance of an insolvent debtor 
to regular judicial proceedings, in which a judgment and levy 
on his property are obtained, when the debt is due and he is 
without just defense to the action, is necessary to show a 
preference of a creditor, or a purpose to defeat or. delay the 
operation of the bankrupt act." Wilson v. City Bank, 17 
Wall. 488; National Bank v. Warren, 96 U. S. 539; Sage 
T. Wyncoop, 104 U. S. 319; Loucheim v. Henzey, 86 Pa. St. 
350; Henkelman v. Smith, 42 Md. 164. In the case of In re 
Heller, 3 Biss. 153, Fed. Cas. No. 6,337, it was said to be 
the duty of an insolvent man, when sued, to take measures 
to secure the equal distribution of his property among his 
creditors, and if he makes no defense to the actions, does 
not notify his other creditors of the suits, nor do anything 
to prevent the obtaining of a preference, he "suffers" his 
property to be taken within the meaning of the law. This 
case, however, undoubtedly goes too far. A much better 
statement of the principle involved is found in Brown v. Jef- 
ferson Co. Nat. Bank, 9 Fed. 258, 19 Blatchf. 315, where 
Blatchf ord, J., observed : "The mere existence of a desire on 
the part of a debtor, however strong such desire, that a par- 
ticular creditor may succeed by suit, judgment, execution, 
and levy, in obtaining a preference over other creditors, so 
that such preference may be maintained even as against pro- 
ceedings in bankruptcy which mav be subsequently com- 
menced, is not sufficient to establish that the debtor pro- 
cured or suffered his property to be taken on legal process, 
with intent to prefer such creditor, if the proceedings of the 
creditor were the usual proceedings in a suit, unaided by 
any act of the debtor, either by facilitating the proceedings 
as to time or method, or by obstructing other creditors who 
otherwise would obtain priority." Hence it is competent 
for a creditor to institute a suit against a bankrupt, and ob- 
tain judgment by default, and issue execution, and unless the 



§ 60) PREFERRED CREDITORS. 191 

bankrupt does some act by which he has participated in 
some way in the act of the creditor, the preference thereby 
acquired is a valid preference as against other creditors. In 
re Eunzi, 3 Fed. 790. But although, under a sound construc- 
tion of the banlvrupt law, mere passive non-resistance by the 
insolvent debtor will not defeat a judgment and levy,, where 
the debt was due and there was no defense to the same, still, 
very slight evidence of an affirmative character of a desire to 
prefer a creditor, or of acts done to secure such preference, 
may be sufficient to invalidate the whole transaction. Par- 
sons v. Caswell, 1 Fed. 74. Where a debtor, being insolvent, 
gave a confession of judgment to one of his creditors, with 
the intention of preferring that creditor, on which judgment 
his property was taken and sold, it was held that this state 
of facts was sufficient to support a petition in involuntary 
bankruptcy, although the debtor did not, at the time, actually 
contemplate bankruptcy, or even know that there was any 
such law as the bankrupt law. In re Craft, 2 Ben. 214, Fed. 
Cas. No. 3,.316. Where the debtor contributes to the ren- 
dition of a judgment at an earlier day than without his aid 
it could have been rendered, intending a preference, and ex- 
ecution and levy follow, he "procures" his property to be 
taken on legal process. Eogers v. Palmer, 102 U. S, 263. So 
where a debtor is sued for a just debt, and interposes a 
groundless defense, in such a manner that another creditor, 
who brings a later suit, to which no defense is made, is en- 
abled to obtain a prior judgment and have a receiver ap- 
pointed, the proper inference is that the debtor intended to 
prefer the latter creditor. Wight v. Muxlow, 8 Ben. 52, Fed. 
Cas. No. 17,629. Althon"-]j the judgment complained of was 
entered against the bankrupt before the passage of the bank- 
rupt act, yet if it be fraudulent and fictitious, and the debtor 
has taken no steps to set it aside, and, after the enactment of 
the law, the judgment being still in force, his property is 
seized on an execution issued thereunder, this is procuring 



192 CREDITORS. CCh. 6 

his properly to be taken, etc. In re Schick, 2 Ben. 5, Fed. 
Gas. No. 12,455. 

Exchange of Securities. 

The leading case on this point is Sawyer v. Turpin, 91 U. 
S. 114, where Strong, J., said: "An exchange of securities, 
within the four mouths, is not a fraudulent preference with- 
in the meaning of the bankrupt law, even when the creditor 
and the debtor know that the latter is insolvent, if the se- 
curity given up is a valid one when the exchange is made, 
and it be undoubtedly of equal value with the security sub- 
stituted for it. * * * The reason is, that the exchange 
takes nothing away from the other creditors." The substitu- 
tion and registration of a chattel mortp-a p'p. correcting a mis- 
take in a prior unrecorded mortgage, is not an illegal pref- 
erence, but simply an exchange of securities. Player v. Lip- 
pincott, 4 Dill. 125, Fed. Cas. No. 11,224. So where the 
bankrupt's debt consists of a sum with accumulated inter- 
est, some time overdue, secured by a valid mortgage, and the 
parties have an accounting and compute the amount due to 
date for both principal and interest, and a new mortgage is 
given for the sum so ascertained, upon the same property, 
the old mortgage being cancelled, this cannot be regarded 
as an illegal preference. Burnhisel v. Firman, 22 Wall. 170. 
And see Douglass v. Vogeler, 6 Fed. 53 ; Hough v. Bank, 4 
Biss. 349, Fed. Cas. No. 6,721. Again, where the debtor, as 
security for a loan of money, gives to the creditor in pledge 
a number of bills receivable, the pledgee may properly hand 
them back to the debtor for purposes of collection, or that 
he may replace them with othe;;s; and in doing so, the 
pledgee does not lose his special property in them, and the 
pledgor holds them in a fiduciary character ; and if the debt- 
or replaces a portion of the collaterals with others, his es- 
tate not being thereby impaired, and no purpose to delay or 
defraud his other creditors being shown, the transaction will 



§ 60) PREFERRED CREDITORS. 193 

not be voidable as a preference. Clark v. Iselin, 21 Wall. 
360. Where a bank levied an attachment upon lands owned 
by its treasurer, who was under liabilities to it far exceed- 
ing in amount the value of the lands, and in order to save the 
trouble of legal proceedings he made a deed of the lands to 
the bank in lieu of the attachment, it was held that cred- 
itors of his who afterwards attached the lands could not 
avoid the conveyance to the bank. Ashuelot Bank v. Frost,. 
19 Fed. 21' T. For a case where a complicated series of trans- 
actions was held not an exchange of securities, see Upbam 
V. Loan & Trust Co., 76 N. Y. 1. 

Cumulative Securities, and Transfer of Property oil/ready In- 
cumbered. 

A confessed judgment for a debt already secured by a 
prior valid lien against the bankrupt's real estate to which 
the judgment creditor had the equitable right of subroga- 
tion, is not impeachable as a fraudulent preference, for it 
takes nothing from the general creditors, and does not im- 
pair the value of the bankrupt's estate. Reber v. Gundy, 
13 Fed. 53. A mortgage is not a preference, where the debt 
is secured by a prior mortgage covering goods subsequently 
acquired, where both mortgages cover the same property, 
Brett V. Carter, 14 N. B. R. 301, Fed. Cas. No. 1,844. A con- 
veyance by an insolvent debtor to his creditor of property 
upon which the said creditor has a lien to a greater amount 
than the value thereof, is not a fraudulent preference. Cat- 
lin T. Hoffman, 2 Sawy. 486, Fed. Cas. No. 2,521. Where 
the bankrupt was a member of a stock exchange, the rules 
of which provided that when a member became insolvent, 
he should assign his seat to be sold, and that the proceeds 
should be first applied to the payment of his debts to mem- 
bers of the exchange, to the exclusion of his other creditors, 
it was held that a member who became insolvent, complied 
with this rule, and was afterward adjudged a bankrupt, 
BL. BANK.— 13 



194 CKEDITOES. (Ch. 6 

was not guilty of a preference to those creditors whose debts 
were, in this manner, first paid. Hyde v. Woods, 94 U. S. 
523. Where the creditor holds a valid and subsisting 
lien on the debtor's property, and the equity of redemption 
therein is conveyed to him under such circumstances as to 
make it a fraudulent preference, the conveyance is void, but 
it does not divest the lien. Avery v. Hackley, 20 Wall. 407. 
Where the seller of goods to the bankrupt has the right to 
stop them in transit, and does so, his recovery of possession 
of them in this manner does not amount to a preference. 
In re Foot, 11 Blatchf. 530, Fed. Cas. No. 4,907. Under the 
act of 1841 (5 Stat. 442), it was held by Nelson, J., that pay- 
ments made by a bankrupt on a judgment recovered under 
such circumstances as to constitute a valid lien on his prop- 
erty, could not be regarded as fraudulent preferences, be- 
cause they operated to discharge, for the benefit of his gen-- 
eral creditors, an amount of property equal in value to the 
sum paid. Livingston v. Bruce, 1 Blatchf. 318, Fed. Cas. 
No. 8,410. 

Advances in Good Faith. 

The principle is thus stated by Judge Dillon: "An in- 
sohent person may properly make efforts to extricate him- 
self from his embarrassments, and therefore he may borrow 
money and give at the time security therefor, provided al- 
ways the transaction be free from fraud in fact and upon 
the bankrupt act. And hence it is a settled principle of 
bankrupt law, both in England and in this country, that ad- 
vances made in good faith to a debtor to carry on business, 
upon security taken at the time, do not violate either the 
terms or policy of the bankrupt act. This is manifestly 
right, since the power to raise ready money may save the 
party from bankruptcy and ruin, and since his creditors are 
not injured nor his estate impaired, because he gets a pres- 
ent equivalent for the debt he creates and the security he 



§ GO) PKEFERREB CREDITORS. 19") 

gives." Darby v. Boatman's Sav. lust., 1 Dill. 141, Fed. Cas. 
No. 3,.571; Gatfney v. tsiguaigo, 1 Dill. 158, Fed. Cas. No. 
5,169; Clark v. Iselin, 10 Blatchf. 204, Fed. Cas. No. 2,825; 
Ex parte Ames, 1 Low. 501, Fed. Cas. No. 323. A merchant 
who (kh'ii ?iot I'How that he is insolvent may pledge his prop- 
erty to another whose money he has unlawfully used, with- 
out thereby making a preference. Jenkins v. Mayer, 2 Biss. 
303, Fed. Cas. No. 7,272. 

Traitrfers Itetween Partners. 

The convej-ance of the joint assets of an insolvent firm to 
a tontiuuing partner is a fraudulent preference under the 
bankrupt act, and if made within the time limited before a 
petition in bankruptcy, it may be set aside at the instance 
of the joint creditors. In re Johnson, 2 Low. 129, Fed. Cas. 
No. 7,369. Thus, where a firm consisting of an active and a 
silent partner was insolvent and known to the partners to be 
so, and was dissolved, the silent partner conveying all his in- 
terest to the other, and the latter, on the same day, and as 
a part of the same transaction, mortgaged the whole stock 
in trade to secure the pre-existing debt of a separate cred- 
itor of eacli partner, and neither partner had any separate 
estate, it was held that this transaction was fraudulent 
throughout as a preference, and both partners were liable 
to be adjudged bankrupt on the petition of a joint creditor. 
In re Waite, 1 Low. 207, Fed. Cas. No. 17,044. 

Miscellanemm Eocamples of Preferences. 

Under the former bankrupt law it was held that a chattel 
mortgage given to secure a creditor more than four months 
before a petition in bankruptcy was filed, but kept off the 
record until within the four months, was not a fraudulent 
preference; for the limitation began to run from the time 
the security was given., not from the time when creditors had 
notice of it. Matthews v. Westphal, 1 McCrary, 440, 48 Fed. 



196 CEEDITORS. (Ch. 6 

664. This case was rested on the authority of Burnhisel v. 
Firman, 22 Wall. 170; Sawyer v. Turpin, 91 U. S. 114; Bean 
V. Brookmire, 1 Dill. 25, Fed. Cas. No. 1,168, and overruled 
Harris v. Bank, 4 Dill. 133, Fed. Cas. No. 6,119. A transfer 
of property to a factor, with intent to give him a preference by 
enabling him to claim a factor's lien thereon, is void. Nudd 
V. Burrows, 91 U. S. 420. And a mortgage given by a trader 
under such circumstances as to make it a preference, will not 
be made valid by the existence of a general parol agreement, 
entered into when the debt was contracted, that security 
should be given when required. In re Connor, 1 Low. 532, 
Fed. Cas. No. 3,118. In a case where a policy of insurance, 
obtained by a debtor on his own life, was assigned to one of a 
firm consisting of four members, in trust, as security for a 
debt due the firm, and two members of the firm subsequently 
retired, and the firm assets passed to the remaining members, 
one of whom was the trustee of the policy, and, the last-named 
firm having become embarrassed and procured an extension 
of credit from their creditors, the trustee of the policy two 
months afterwards assigned the policy to his sons in trust 
for their mother without consideration, and six months later 
made a general assignment, and shortly after was thrown 
into bankruptcy, it was held that the assignment of the policy 
in trust for the mother must be deemed invalid as to creditors, 
and that the assignee in bankruptcy was entitled to the pro- 
ceeds. Barnes v. Vetterlein, 16 Fed. 218. But on the other 
hand, where bankrupts, before insolvency or contemplation 
thereof, delivered their bill of exchange drawn on a certain 
firm payable at a future day to certain creditors, and said 
creditors, after the insolvency and with knowledge that it h ^.d 
occurred, presented the bill to said firm, who accepted it, 
while ignorant of the insolvency, thereby obtaining an equita- 
ble lien for its amount upon property in their hands as con- 
signees of the bankrupts, it \\'as held that the payment of 
the bill was not an illegal preference, although made after 



§ 60) PREFERRED CREDITORS. 197 

the bankruptcy was notorious.' In re Baxter, 28 Fed. 452. 
An agreement by a creditor not to prosecute a debtor for a 
misdemeanor affecting public interests is an illegal considera- 
tion, and will not support a transfer of the debtor's property 
to the creditor with knowledge of his insolvency. Sharp v. 
Warehouse Co., 10 Fed. 379. Where the obligor in a bond, in 
order to indemnify his sureties, obtained certain securities 
from one of his debtors and turned them over to the sure- 
ties, the transaction was held a preference. Smith v. Lit- 
tle, 5 Biss. 490, Fed. Cas. No. 13,072. So if, in advance of 
his liability being fixed, an indorser takes the bankrupt 
maker's property to meet the note when it shall mature, or 
to secure himself against loss, he will be liable as accept- 
ing a preference. Sill v. Solberg, 10 Biss. 252, 6 Fed. 468; 
Ahl V. Thorner, 2 Bond, 287, Fed. Cas. No. 103. Where a 
debtor, knowing that his creditor is insolvent, accepts a 
draft drawn on him by such creditor, the draft being drawn 
and accepted with the purpose of giving a preference, the 
transaction is a fraud on the bankrupt act, and the trust<^e 
can recover from the acceptor the amount of the draft. Fox 
V. Gardner, 21 Wall. 475. The debtor cannot escape the ef- 
fect of a preference by passing the conveyance through his 
wife. So held where the debtor, being Insolvent, conveyed 
his real estate to his wife without consideration, and she 
gave a mortgage thereon to creditors who knew the debtor 
to be insolvent. Gibson v. Dobie, 5 Biss. 198, Fed. Cas. No. 
5,394. But a payment or other disposition of property 
made by a debtor after the adjudication of bankruptcy 
against him is not a preference, but simply an unlawful 
meddling with the property of the trustee and therefore 
a nullity. In re Randall, 1 Sawy. 56, Fed. Cas. No. 11,552. 

Pressure, Solicitation, or Threats. 

The doctrine of "pressure" by a creditor to force the giv- 
ing of a security for the payment of a debt has no applica- 



19S CREDITORS. (Ch. 6 

tion nnder the bankrupt act, and when a debtor mortgages 
his property to secure such a debt, it is no defense to an al- 
legation that the preference was fraudulent to say that he 
was "pressed" to do it. Eison v. Knapp, 1 Dill. 1S7, Fed. 
Cas. No. 11,801; Foster t. Hackley, 2 N. B. K. 400 (132), Fed. 
Gas. No. 4,971; Wilson v. Brinkman, 2 N. B. R. (408) 149, Fed. 
Cas. No. 17,794; Graham v. Stark, 3 N. B. E. 357 (93), Fed. 
Cas. No. 5,076. So the fact that a warrant of attorney to con- 
fess judgment, given under such circumstances as to make It 
a preference, was executed under threats of legal process 
and arrest, and in fear of disgrace, does not shield the debt- 
or; the act is nevertheless voluntary. Campbell v. Bank, 
2 Biss. 423, Fed. Cas. No. 2,370. Nor does it alter the case 
that the debtor was advised by counsel that unless he 
made the payment he would be liable to a criminal prosecu- 
tion under the state law. Strain v. Grourdin, 2 Woods, 
380, Fed. Cas. No. 13,521. And it is immaterial that the 
preference was given at the urgent solicitation of the cred- 
itor. Clarion Bank v. Jones, 21 Wall. 325. 

What Constitutes Insolvency. 

Under former bankruptcy laws, where the term "insol- 
vency" was not expressly defined, it was held that this word 
does not imply an absolute inability to pay one's debts at 
a future time upon a settlement and winding up of his con- 
cerns; but it means that the trader is not in a condition to 
pay his debts as they mature in the ordinary course of his 
business, as persons in trade usually do. In re Doyle, 
Holmes, 01, Fed. Cas. No. 4,050; Bailey v. Schofleld, 1 Maule 
& S. 338; Thompson v. Thompson, 4 Cush. 127; May v. Le 
Claire, 18 Fed. 164; In re Gay, 2 N. B. E. 358 (114), Fed. Cas. 
No. 5,279; Toof v. Martin, 13 W^all. 40; Wager v. Hall, 16 
AVall. 599; In re Bininger, 7 Blatchf. 262, Fed. Cas. No. 1,420; 
Warren v. Bank, 10 Blatchf. 493, Fed. Cas. No. 17,202; Saw- 
yer V. Turpin, 2 Low. 2'.), Fed. Cas. No. 12,410. "A trader is 



§ 60) PREFERRED CREDITORS. 190 

insolvent when he cannot pay his debts in the ordinary 
course of business, although he may not be compelled to 
stop business from his inability, and although, on a settle- 
ment of his affairs, he may have sufficient to pay in full.'' 
Woods, J., in Jackson v. McCulloch, 1 Woods, 433, Fed. Gas. 
No. 7,140. "Insolvency, within the meaning of the bank- 
rupt act, means inability to pay debts in the ordinary course 
of business, and unless the debtor is able to pay such debts 
as they mature, with money, he is insolvent in the contem- 
plation of said act, notwithstanding he may have lands and 
goods suflQcient in time to meet all his liabilities." Anshutz 
V. Hoerr, 1 Fed. 592; Swan v. Eobinson, 5 Fed. 287. And 
the fact that a merchant, in a mercantile community, who 
has no defense to debts maturing in the course of his busi- 
ness, submits to be sued, to compel payment of such debts, 
is a very high evidence of his inability to pay them. Mayer 
V. Hermann, 10 Blatchf. 256, Fed. Cas. No. 9,344. But the 
first section of the present act (clause 15) provides that "a 
person shall be deemed insolvent, within the provisions of 
this act, whenever the aggregate of his property, exclusive 
of any property which he may have conveyed, transferred, 
concealed, or removed, or permitted to be concealed or re- 
moved, with intent to defraud, hinder, or delay his cred- 
itors, shall not, at a fair valuation, be sufflcient in amount 
to pay his debts." 

The question whether or not the preference was made at 
a time when the debtor was insolvent is a question for the 
jury. Pierce v. Evans, 61 Pa. St. 415. 

Notice Imputable to Creditor; What is Reasonable Cause 
of Belief. 

The rule upon this subject, as stated by Mr. Justice Field 
in the leading case of Toof v. Martin, 13 Wall. 49, is as fol- 
lows: "The statute, to defeat the conveyances, does not re- 
quire that the creditors should have had absolute knowledge 



200 CRKDITOES. (Ch. 6 

on the point, nor even that they should, in fact, have had any 
belief on the subject. It is only required that they should 
have had reasonable cause to believe that such was the fact. 
And reasonable cause they must be considered to have had, 
when such a state of facts was brought to their notice in 
respect to the affairs and pecuniary condition of the bank- 
rupts as would have led prudent business men to the conclu- 
sion that they could not meet their obligations as they ma- 
tured in the ordinary course of business." And the trans- 
feree is not only charged with notice of facts within his 
knowledge, but of all such as lie could have discovered upon 
inquiry, if reasonable prudence required inquiry. Rice v. 
Melendy, 41 Iowa, 399; Scammon v. Cole, 3 Cliff. 472, Fed. 
Cas. No. 12,432; Ex parte Mendell, 1 Low. 506, Fed. Cas. No. 
■9,418. And although the general business transactions and 
condition of the bankrupt, at the time of making a deed of 
preference, may not have been sufficient to raise a reasonable 
belief that he was insolvent, yet if the especial facts and cir- 
cumstances passing between the particular parties, and out 
of which the deed grew, were such as to give a reasonable 
cause for such belief, the creditor is chargeable with notice. 
Alderdice v. Bank, 1 Hughes, 47, Fed. Cas. No. 154. Igno- 
rance of the law cannot avail creditors who are possessed of 
facts that show the insolvency of the debtor, and a prefer- 
ence received under such circumstances is fraudulent and 
void. Martin v. Toof, 1 Dill. 203, Fed. Cas. No. 9,167. But 
^ 'it is not enough that a creditor has some cause to suspect 
the insolvency of his debtor; he must have such a knowledge 
of facts as to induce a reasonable helief of his debtor's in- 
solvency, in order to invalidate a security taken for his debt." 
Grant v. Bank, 97 U. S. 80; Stucky v. Bank, 108 U. S. 74, 
2 Sup. Ct. 219; May v. Le Claire, 18 Fed. 164. The reason- 
able cause must be such as would induce a belief in the mind 
of an intelligent and capable business man. Otis v. Hadley, 
112 Mass. 100; Graham v. Stark, 3 N. B. R. 357, Fed. Cas. 



§ 60) PEKFEllRED CREDITORS. 201 

No. 5,676. Hence a preference may be avoided under the 
bankrupt law whenever the creditor has knowledge of facts 
calculated not merely to raise a suspicion, but to produce a 
reasonable belief of the debtor's insolvency. What facts are 
necessary to produce such belief must be determined in each 
particular case. Claridge v. Kulmer, 1 Fed. 399. And see 
Metcalf V. Officer, 2 Fed. 640. When it is sought to affect a 
second vendee (of the bankrupt's stock in trade) with fraud, 
such fraud must be shown ; and the mere fact, without more, 
that he knew that the sale by the bankrupt to the first ven- 
dee embraced all of the stock of the seller, will not make the 
purchase of the second vendee fraudulent in law. Babbitt 
V. Walbrun, 1 Dill. 19, Fed. Cas. No. 694. As in other mat- 
ters, knowledge may be brought home to the creditor by the 
possession of information on the part of those who are bound 
to communicate it to him. Thus, where two members of an 
insolvent firm are president and cashier of a bank, their 
knowledge of the insolvency of their firm is the knowledge 
of the bank. Nesbit v. Macon Co., 12 Fed. 686. Where the 
creditor employs an attorney to collect his debt by suit, and 
all the facts made necessary by the bankrupt law to inval- 
idate a preference gained by such suit are made known to the 
attorney after he enters on such employment, the knowledge 
of the attorney is the knowledge of the creditor. Mayer v. 
Hermann, 10 Blatchf. 256, Fed. Cas. No. 9,344; Rogers v. 
Palmer, 102 U. S. 263. But where the creditor sent an ac- 
count to a collection agency with directions to collect the 
debt, and the agency placed the claim in the hands of their 
attorney (who was not the attorney of the creditor),. and the 
attorney, knowing the debtor to be insolvent, procured a 
confession of judgment from him, and within four months 
thereafter the debtor was adjudged a bankrupt, it was held 
that the knowledge of the attorney was not imputable to the 
creditor, under these circumstances, so as to make him lia- 
ble to the trustee in bankruptcy for the money collected on 



202 CREDITORS. (Ch. 6 

the judgment. Hoorer v. Wise, 91 U. S. 308. A banker who 
allows his drafts to go to protest, suspends payment, and 
closes his doors against depositors, proclaims to the world 
that he is insolvent, and a creditor who, with knowledge of 
these facts, receives payment of his debt, secures an illegal 
preference. Markson v. Hobson, 2 Dill. :}2T, Fed. Gas. No. 
[),(]'J9. Ko where a merchant stops payment of his commer- 
cial paper, and the holder, being compelled to bring suit on 
thf same, encounters no defense, he has reasonable cause to 
believe that the merchant is insolvent. Dunning v. Perkins, 
2 Eiss. 421, Fed. Oas. No. 4,180. But the simple fact that a 
man doing a large business obtains renewals of his com- 
mercial paper or pays, under special circumstances, a large 
discount, is not notice of insolvency to a creditor, it being 
shown that at that time similar commercial paper was sell- 
ing at equal rates in the market. Golson v. Niehoff, 2 Biss. 
434, Fed. Cas. No. 5,524. As it has been decided repeatedly 
that inability to meet debts as they mature in the ordinary 
course of business constitutes insolvency within the mean- 
ing of the bankrupt act, a creditor who holds unpaid protest- 
ed i:aper of the bankrupt at the time he accepts a preference 
must be presumed to have actual knowledge of the insol- 
vency of the bankrupt; and any contract by which such pref- 
erence is attempted to be secured is thereby made void. 
Swan V. Eobinson, 5 Fed. 287. A creditor may also be af- 
fected by rumors which he has heard concerning the debtor's, 
embarrassment. Post v. Corbin, 5 N. B. K. 11, Fed. Cas. No. 
11,299. And the existence of a financial crisis constitutes of 
itself reasonable cause for believing doubtful men to be in- 
solvent. In re Clarke, 10 N. B. E. 21, Fed. Cas. No. 2,843. 
Where ah execution must necessarily sto]i the debtor's busi- 
ness, the execution in general is reasonable cause to believe- 
the debtor insolvent. Hood v. Karper, 5 N. B. E. 358, Fed. 
Cas. No. 6,064; Zahm v. Fry, 9 N. B. E. 546, Fed. Cas. No. 
18,198. So again, the debtor s remonstrance, that the giving; 



§ GO) PREFERRED CREDITORS. 203 

of the security demanded will injure his business, is sufficient 
to put the creditor upon inquiry. Wager v. Hall, 16 Wall. 
5S4. "If it appears that the party making the conveyance 
was actually insolvent, and that the means of knowledge up- 
on the subject were at hand, and that such facts and circum- 
stances were known to the party receiving the conveyance 
as clearly put the assignee, transferee, or grantee of the prop- 
erty upon inquiry, it would seem to be just to hold that the 
party receiving the assignment, transfer, or conveyance, even 
if he omitted to make inquiries, had reasonable cause to be- 
lieve that his assignor or grantor was insolvent." Scammon 
V. Cole, 3 Cliff. 472, Fed. Cas. No. 12,432. Hence it will not 
do to ask protection on account of ignorance, when a small 
amount of inquiry would have given all the necessary infor- 
mation. In re Wright, 2 N. B. K. 490, Fed. Cas. No. 18,071. 
And when the facts and circumstances are such as to put a 
reasonable man upon inquiry, that duty is not satisfied by an 
inquiry addressed to the chief actor in the suspected fraud, 
who has every motive for concealing the truth, when better 
and reliable sources of information are oijen to the inquirer. 
Singer v. Jacobs, 11 Fed. 559. 

Meiuving of '"'' Trannfer.'^'' 

This section of the act provides that, under certain circum- 
stances, a "transfer" of any of the debtor's property may con- 
stitute a preference. That this term is to be taken in a very 
wide sense is apparent on reference to the first section of the 
act (clause 25) wherein it is declared that "transfer shall in- 
clude the sale and every other and different mode of dispos- 
ing of or parting with property, or the possession of property, 
absolutely or conditionally, as a payment, pledge, mortgage, 
gift, or security." 



"-V. 



204 CREDITORS. (.Ch. (j 

Intention of DM or. 

Under former laws on the subject of bankruptcy, it was 
not only necessary that the creditor should have had rea- 
sonable cause to believe that a preference was intended, but 
such must have been the actual intention of the debtor. 
The present statute, however, only makes it necessary that 
"the effect of the enforcement of such judgment or transfer" 
should be "to enable any one of his creditors to obtain a 
greater percentage of his debt than any other of such cred- 
itors of the same class." This appears to make the intention 
of the debtor immaterial, provided a preference actually re- 
sults; or rather, perhaps, it applies the rule that a man must 
be presumed to have intended the necessary consequences of 
his own acts. But since there may be some cases in which 
the intention of the insolvent may become an actual and ma- 
terial issue, we append notes of the decisions on this point 
rendered under the former statutes. 

When the question at issue is whether a particular thing 
was given or done ^ith a view to create a preference, it is- 
the intention of the debtor which must be scrutinized, for that 
is the turning-point of the case. Little v. Alexander, 21 Wall. 
500; In re Craft, 2 Ben. 214, Fed. Cas. Xo. 3,316. H the 
debtor did not intend to give a preference, and the creditor did 
not have reasonable cause to believe the debtor to be insolvent, 
the transfer is valid, although in fact the debtor was then 
insolvent. Mays v. Fritton, 20 Wall. 411. The motives of 
the bankrupt, as well as all the peculiar circumstances con- 
nected with the transaction, must be taken into consideration 
in order to determine whether he thereby gave a fraudulent 
preference to one creditor over others; and if he believed, 
and such was the fact, that money received by him from such 
creditor was in the nature of trust-funds, so that it would not 
create the ordinary relation of debtor and creditor between the 
parties, but a claim upon which there was a special and pe- 
culiar obligation, on his part, in the nature of a trust, to settle. 



§ 60) PREFERRED CREDITORS. 20.5- 

a settlement thereof cannot be considered a fraudulent prefer- 
ence within the meaning of the bankrupt law. In re Frant- 
zen, 20 Fed. 785. But the requisite intent on the part of an 
insolvent debtor to give, and of a creditor to secure, an illegal 
preference, may be inferred from circumstances. Vanderhoof 
V. City Bank, 1 Dill. 47C, Fed. Cas. No. 16,842. And when a 
debtor is insolvent and knows it, any payment then made by 
him to a creditor in full must be made with an intent to prefer,, 
as the intention of the parties is to be judged from the legal 
effects of their acts. Traders' Bank v. Campbell, 14 Wall. 
87. Where the circumstances tend to show an intent to give 
and receive a preference, the failure to produce the testimony 
of the debtor, or of the alleged preferred creditor, as to the in- 
tent, will be considered strongly corroborative of the evidence 
of an intent to prefer. Darling v. Townsend, 5 Fed. 176. 
Where one had ceased to be a trader years before, and had 
disposed of all his property, but not settled all his trade debts, 
and was living on his salary as a clerk, and paid his rent and 
some other necessary expenses every month, without intend- 
ing to become bankrupt, it was held that such payments were 
not fraudulent preferences of which his trade creditors could 
take advantage in opposing his discharge. In re Locke, 1 Low.. 
293, Fed. Cas. No. 8,439. 

Burden of Proof. 

The burden of showing that a creditor of a bankrupt has- 
acquired an illegal preference is upon the trustee in bank- 
ruptcy seeking to avail himself of that fact. He must estab- 
lish, by a fair preponderance of proof, that the debtor was in- 
solvent, or in contemplation of bankruptcy or insolvency, that 
the security was designed to give a preference, and that the 
creditor had reasonable cause to believe the fact of insol- 
vency, and knew the security was intended as a preference. 
Crane V. Penny, 2 Fed. 187; Parsons v. Topliff, 14 N. B. E. 
547 J Barbour v. Priest, 103 U. S. 293. In the case last cited. 



206 CREDITORS. (Ch. 6 

the court observed: "It has never been denied, so far as we 
are advised, that it is necessary for the assignee of the bank- 
rupt, in attacliing such a conveyance, to prove the existence 
of this reasonable cause of belief of the debtor's insolvency in 
the mind of the preferred party." But since one is always 
presumed to intend the necessary and legitimate consequences 
of his own acts (2 Whart. Ev. § 125S), "where the act which 
is made the act of bankruptcy is a passive act, such as that of 
suffering property to be taken on legal process, when the 
debtor is insolvent or in contemplation of insolvency, with in- 
tent to give a preference to a creditor, if the natural and prob- 
able consequence of the act of sufferance is to give the prefer- 
ence to the creditor, it will be inferred that the debtor had such 
intent, unless he shows the contrary; and the burden will be 
upon him to show the contrary." Blatchford, J., in In re 
Black, 2 Ben. 196, Fed. Cas. No. 1,457: Webb v. Sachs, 4 
Sawy. 158, Fed. Cas. No. 17,-325. The testimony of the parties 
to a transaction challenged as preferential under the bankrupt 
law, as to their intentions, though competent, is inherently 
weak and can rarely avail against the stronger proof which the 
transaction itself affords. Oxford Iron Co. v. Slafter, 13 
Blatchf. 455, Fed. Cas. No. 10,637. 

Recovery hj Tnmtep. 

Under the provisions of this section, it might appear at first 
sight that the trustee could not maintain an action to set aside 
or avoid a transfer of property made by the debtor prior to 
the time limited by the bankrupt law itself; that if such trans- 
fer or conveyance were made more than four months before the 
filing of the petition in bankruptcy, the trustee would have no 
authority to recover the property. But this is to be read in 
connection with section 70 of the act, which provides that there 
shall vest in the trustee the title to "property transferred by 
him [the bankrupt] in fraud of his creditors," and that "the 
trustee may avoid any transfer, by the bankrupt, of his prop- 



§ 60) PKEFKRKED CREDITORS. 207 

erty which any creditor of such banlirupt might have avoided, 
and may recover the property so transferred, or its value, from 
the person to whom it was transferred, unless he was a bona 
fide holder for value prior to the date of the adjudication." 
And it has been decided, under a substantially similar clause, 
that this gives to the trustee a right of action to annul any 
fraudulent conveyance of the bankrupt, whenever made, even 
before the bankrupt act was passed, so it be not barred by the 
statute of limitations. Cady v. Whaling, 7 Biss. 430, Fed. Gas. 
No. 2,285; Cookingham v. Ferguson, 8 Blatchf. 488, Fed. Gas. 
No. 3,182. Where property has been transferred under such 
circumstances as to constitute a preference, the trustee may 
recover possession of the property itself, and the market value 
of any that has been sold by the transferee, with interest from 
the time he demanded it. Gookingham v. Morgan, 7 Blatchf. 
480, Fed. Gas. No. 3,183. The trustee of one partner cannot 
set aside a conveyance made by both partners with intent to 
prefer a joint creditor, the other partner not being bankrupt; 
for the preference does not become fraudulent and therefore 
voidable, unless they lyoth besoms banki'upt within the tin:e 
limited. Forsaith v. Merritt, 1 Low. 336, Fed. Gas. No. 4,946. 
Where the grantee in a conveyance made by an insolvent 
debtor, in fraud of the bankrupt act, takes the title merely at 
the request of and in trust for a third person, and derives no 
profit from the transaction, he is not liable to the assignee in 
bankruptcy for the value of the land, unless he not only knew 
of the insolvency, but also shared the bankrupt's intent to de- 
feat the law. Alleman v. Kneedler, 2 Fed. 671. The amount 
which the trustee is entitled to recover from a creditor who 
has received a preference by means of a judgment, is the gross 
amount obtained on execution, without any deduction for the 
costs and expenses of the creditor. Traders' Bank v. Gamp- 
bell, 14 Wall. 27; Street v. Dawson, 4 N. B. E. 207, Fed. Gas. 
No. 13,533. 



2U8 ESTATES. (Ch. 7 

CHAPTER Vn. 

ESTATES. 
DEPOSITOKIES FOR MONEY. 

§ 61. a Courts of bankruptcy shall designate, by 
order, banking institutions as depositories for the 
raoney of bankrupt estates, as convenient as may 
be to the residences of trustees, and shall require 
bonds to the United States, subject to their approv- 
al, to be given by such banking institutions, and 
may from time to time as occasion may require, 
by like order increase the number of depositories 
or the amount of any bond or change such depos- 
itories. 

Depositories. 

Under the statute and the rules of court, all sums of money 
received by assignees in bankruptcy, and by the clerk of the 
district court were required to be deposited, with a certain 
bank to be named by the court, to be drawn out upon the 
checks of the court. The funds so deposited were kept as a 
unit to the credit of the court, and were paid out on checks 
signed by the clerk and countersigned by the judge. 
The clerk failed to make deposit of all the funds received 
by him, and the bank paid checks drawn on it until it had 
l)aid out all the funds deposited, but refused to pay other 
checks drawn, whereupon suit was brought on a check so 
refused. It was held that the bank was not liable to the 
holder of such check. As there was no misappropriation of 
the funds by the bank, it was not liable for any deficit in the 
amount due beneficiaries, arising from the neglect of the clerk 



§ 62) EXPENSKS OF ADMINISTERING ESTATES. 209 

to deposit all the trust funds that came to his hands as an 
officer of the court. The bank was not bound to open a sepa- 
rate account as to the several cases in which the deposits 
were made, nor to take notice of any memoranda either on 
the margin or in the body of any check drawn upon it, for such 
memoranda are to be regarded as having been made for the 
convenience of the drawers, and not as an order or direction 
to the bank. State Nat. Bank v. Keilly, 124 111. 4G4, 14 N. E. 
657. 

EXPENSES OF ADMINISTERING ESTATES. 

§ 62. a The actual and necessary expenses in- 
curred, by officers in the administration of estates 
shall, except -where other provisions are made for 
their payment, be reported in detail, under oath, 
and examined and approved or disapproved by the 
court. If approved, they shall be paid or allo-wred 
out of the estates in -which they -were incurred. 

Allowance for Expenses. 

On a trustee's accounting in bankruptcy, charges for the 
employment of a book-keeper will not be passed, beyond what 
is proved to have been necessary in the administration of the 
estate, nor for a longer period than the exigencies required. 
And where charges are made for a book-keeper employed 
partly in the personal business of the trustee, and partly for 
the estate, no apportionment of charges by the trustee will be 
approved except upon proof of the services rendered, their 
necessity, and their reasonable value. In re Barnes, 18 Fed. 
158. And the same rule applies to rent for offices used for 
both purposes. Id. The court may, in proper cases, author- 
ize the trustee to expend money of the estate in finishing 
goods for sale, when it is clear that benefit will result to the 
estate, and that the work can be done within a reasonable 

BL. BANK.— 14 



210 ESTATES. (Ch. 7 

time. Foster v. Ames, 1 Low. 313, Fed. Gas. No. 4,965. A 
trustee is not at liberty to charge the assets of the estate in 
his hands for professional and clerical services rendered him 
in the execution of his trust, unless the same shall have been 
first duly allowed by the court. In re Noyes, 6 N. B. E. 277, 
Fed. Gas. No. 10,371. This allowance for services cannot be 
made until after the services have been rendered, because, 
until the court is advised what the services have been, it can- 
not determine whether any particular amount of compensa- 
tion is or is not reasonable. In re Hughes, 2 Ben. 85, Fed. 
Oas. No. 6,841. Fees for the assistance of an attorney will 
not be allowed without the most satisfactory evidence going 
to show the necessity for legal aid on the part of the trustee 
and the actual rendition of the services charged for. In re 
Tulley, 3 N. B. E. 82, Fed. Gas. No. 14,235. A trustee's ac- 
count for money paid to an attorney for services not author- 
ized by the court cannot be allowed beyond what the evidence 
shows to be reasonable, having reference to the amount and 
circumstances of the estate. In re Cook, 17 Fed. 328. A 
trustee cannot be permitted to expend the chief part of the 
money collected by him in the employment of an attorney to 
search for additional property, which results in nothing. Id. 
The attorneys having charge of proceedings in behalf of the 
trustee are bound to take steps to procure indemnity from the 
general creditors, in whose interest proceedings for the remis- 
sion of a forfeiture were instituted by them, before incurring 
large expenses therein; and not having done so, and the pro- 
ceedings being fruitless and without benefit to the estate, 
neither they nor the trustee have any claim for their services 
in the remission proceedings, as against the fund. In re 
Barnes, 18 Fed. 158. The court, in its discretion, may allow 
to the trustee additional compensation for his own services 
as an attorney at law in the conduct of necessary litigation 
for the preservation of the estate. In re Welge, 1 McGrary, 
46, 1 Fed. 216. Where creditors have in good faith brought 



§ 62) EXPENSES OF ADMINISTERING ESTATES. 211 

suit against the trustee, and have been defeated, and the 
estate is insufficient to pay both their costs and the costs and 
counsel fees of the trustee, the latter is entitled to preference. 
Gazin v. Norton, 38 Fed. 200. A voluntary assignee in in- 
solvency, under a void assignment will not be reimbursed his 
expenses incurred under the assignment, nor is he entitled to 
compensation for services as assignee. For such services 
and disbursements, however, as benefit the general body of 
creditors, either by reason of the preservation of the fund to 
their use, by advantageous collection of assets, or by conver- 
sion of property into money, he will be allowed what is reason- 
able and just. Hunker v. Bing, 9 Fed. 277. In a case of in- 
voluntary bankruptcy, the creditor on whose petition the 
debtor is adjudged bankrupt, and who pays his attorney a 
reasonable fee for prosecuting the proceeding, is entitled to 
receive the amount so paid out of the assets of the estate be- 
fore a dividend is declared. But he is not entitled to reim- 
bursement for time and money spent in traveling to and from 
the court and in attending the trial of the case. In re King, 
4 Biss. 319, Fed. Cas. No. 7,780. See, also. In re New York 
Mail S. S. Co., 7 Blatchf. 178, Fed. Cas. No. 10,208. 

Fees of Successive Trustees. 

A former trustee of a bankrupt estate has not a prior 
claim for his compensation to that of a subsequent trustee in 
whose hands there are not sufficient funds to pay the charges 
of both. And it seems that in such a case the amount should 
be divided pro rata between the two trustees. In re Schnei- 
der, 15 Fed. 913. 



212 ESTATES. (Oh. 7 

DEBTS WHtCH MAY BE PROVED. 

§ 63. a Debts of the bankrupt may be proved 
and allowed against his estate -which are (1) a fixed 
liability, as evidenced by a judgment or an instru- 
ment in writing, absolutely owing at the time of 
the filing of the petition against him, w^hether then 
payable or not, with any interest thereon which 
w^ould have been recoverable at that date or with 
a rebate of interest upon such as w^ere not then 
payable and did not bear interest; (2) due as costs 
taxable against an involuntary bankrupt w^ho was 
at the time of the filing of the petition against him 
plaintiff in a cause of action which w^ould pass to 
the trustee and w^hich the trustee declines to pros- 
ecute after notice; (3) founded upon a claim for 
taxable costs incurred in good faith by a creditor 
before the filing of the petition in an action to re- 
cover a provable debt; (4") founded upon an open 
account, or upon a contract express or implied; and 
(5) founded upon provable debts reduced to judg- 
ments after the filing of the petition and before the 
consideration of the bankrupt's application for a 
discharge, less costs incurred and interests accrued 
after the filing of the petition and up to the time 
of the entry of such judgments. 

6 Unliquidated claims against the bankrupt may, 
pursuant to application to the court, be liquidated 
in such manner as it shall direct, and may there- 
after be proved and allowed against his estate. 



§ 63) DEBTS WHICH MAY BE PKOVED. 213 

Provable Debts. 

As a general rule, every debt recoverable either at law or 
in equity is provable in bankruptcy. In re Jordan, 2 Fed. 
319. But a debt contracted by the bankrupt subsequent to 
the commencement of the proceedings against him cannot be 
proved in bankruptcy. In re Merrell, 19 Fed. 874. The fees 
of an attorney for resisting an involuntary adjudication and 
preparing the schedules cannot be proved as a debt against 
the bankrupt unless the retainer was prior to the date of the 
filing of the bankruptcy petition. In re Ward, 12 Fed. 325. 

Debts Payable in the Future. 

The law provides that debts which are owing at the time of 
the petition shall be provable, whether they are immediate- 
ly payable or payable in the future. The test is the fixed 
and certain character of the liability. Thus, one who holds 
the bankrupt's note not yet due, has a good right to peti- 
tion, for his claim is provable. In re Alexander, 1 Low. 470, 
Fed. Cas. No. 161. So the liability of a subscriber to cor- 
porate stock for his unpaid subscription is a provable debt 
in bankruptcy against the estate of such subscriber, although 
no assessment has yet been made, because the debt, although 
not yet due, is fixed and ascertainable. Glenn v. Abell, 39 
Fed. 10. But compare, as to the last point, Sayre v. Glenn, 
87 Ala. 631, 6 South. 45, where a contrary ruling was made. 

Pquitable De^nands. 

A debt, in order to be provable in bankruptcy, need not be 
enforceable at law, but may be of an equitable character. 
Sigsby V. Willis, 3 Ben. 371, Fed. Cas. No. 12,849. Where 
an assignee in bankruptcy made a demand for certain wagons 
belonging to the bankrupt which were stored in the peti- 
tioner's barn, and delivery was refused on the ground of a 
lien claimed on them for storage, it was held that the refusal 
to deliver to the assignee on demand was in the petitioner's 



214 ESTATES. (Oh. 7 

own wrong, and debarred her from any claim for subsequent 
storage while held under that refu&al. But it was also held 
that the petitioner was entitled to an equitable compensation 
for the storage of the goods from the time of the proceedings 
in bankruptcy up to the time of the demand and refusal. 
In re Kelly, 18 Fed. 528. And see, on a somewhat similar 
state of facts, In re Secor, Id. 319. The costs of an attach- 
ment, laid by the wife of the bankrupt in a libel for divorce, 
are not provable in the bankruptcy, and are not an equitable 
charge against the assets in the hands of the trustee. In re 
Foye, 2 Low. 399, Fed. Gas. No. 5,021. 

Mreaches of Covenant. 

A covenant against incumbrances, in a deed of land, is 
broken, immediately upon the conveyance, by an outstand- 
ing and unpaid mortgage; and the damages from such breach 
constitute a debt provable against the grantor in bankrupt- 
cy. Keed v. Pierce, 36 Me. 455 ; Parker v. Bradford, 45 Iowa, 
311; Williams v. Harkins, 55 Ga. 172. So a demand aris- 
ing from the breach of a covenant for quiet enjoyment con- 
tained in a deed, is a contingent debt provable in bank- 
ruptcy. Jemison v. Blowers, 5 Barb. 686. A claim arising 
in damages for breach of a warranty of a piece of machin- 
ery is provable when the breach occurred before the petition 
in bankruptcy was filed. Merrill v. Schwartz, 68 Me. 514. 
And a claim founded upon a covenant to repay part of the 
premium paid for a policy of insurance issued by a stock 
company, upon cancellation of the policy, is provable in bank- 
ruptcy. In re Independent Ins. Co., 2 Low. 187, Fed. Cas. 
No. 7,019. 

t7udgm,ents. 

A judgment is a provable debt in bankruptcy. But a ver- 
dict, without a judgment upon it is not a provable debt; it 
does not come within the category of claims whose payment 



§ 63) DEBTS WHICH MAY BE PROVED. 215 

is postponed to a future day. Black v. McClelland, 12 N. 
B. E. 481, Fed. Cas. No. 1,462. Where a judgraent debt is 
offei'ed for proof against the estate of a bankrupt, whose pe- 
tition was filed after the rendition of the judgment, it may 
be objected to by the other creditors on the ground of fraud 
or irregularity, including fraudulent preference, for they, not 
being parties or privies to the judgment, are not prohibited 
from subjecting it to collateral impeachment when it con- 
flicts with their interests. Ex parte O'Neil, 1 Low. 163, Fed. 
Cas. No. 10,527. 

Liability of Bankrupt as Drawer, Indorser, or Surety. 

Where a party, previous to becoming a bankrupt, was 
liable on a bond, by the terms of which he became a contin- 
uing guarantor of notes discounted by a certain bank for a 
company of which he was the president, and at the time of 
his bankruptcy the bank held a note so discounted, indorsed 
by him, the fact that a renewal note was given after the filing 
of his petition, will not prevent the debt from being proved 
as a claim against the estate. In re Letchworth, 19 Fed. 
873. A claim of this character, against the bankrupt, un- 
der this clause of the act, cannot be proved until the liabil- 
ity has become fixed. Until that time it is not regarded as 
a debt due and payable, or even as a debt existing but not 
payable until a future day, in such sense as to be provable. 
In re Loder, 4 N. B. E. 190, Fed. Cas. No. 8,457. And in or- 
der to charge the bankrupt as indorser upon a demand 
note, the note must be presented for payment within a rea- 
sonable time; a demand after four years is not suflftcient. 
In re Crawford, 5 N. B. E. 301, Fed. Cas. No. 3,364. The act 
includes indorsers who are liable in the second instance 
only. McNeil v. Knott, 11 Ga. 142. The guarantors of a 
note, the holder of which has forfeited his claim against 
the bankrupt estate, have no right to prove against the es- 
tate, for their liability has been already discharged by the 



216 ESTATES. (Ch. 7 

act of the principal. In re Ayers, 6 Biss. 48, Fed. Cas. No. 
685. So where an indorsee of a note has proved his claim 
against the estate of the maker in bankruptcy, and 
afterwards, pending the bankruptcy proceedings, receives 
payment from the indorser, his relation to the liability 
ceases, he can no longer be considered a creditor of the' 
maker, and he can take no further part in the proceed- 
ings; but the indorser is subrogated to his rights in respect 
of the demand, and it belongs to him to participate, in that 
capacity, in the future proceedings. In re Broich, 7 Biss. 
303, Fed. Cas. No. 1,921. The bona fide holder for value 
of an accommodation bill is entitled, on the bankruptcy of 
the parties thereto, to prove as to all parties against whom 
the holder could have supported an action on the bill. 
Downing v. Traders' Bank, 2 Dill. 136, Fed. Cas. No. 4,046. 
Where the bankrupt is the indorser of a note, and the maker 
has paid a part thereof to the holder, the latter can prove 
against the bankrupt's estate only for the balance unpaid. 
In re Pulsifer, 9 Biss. 487, 14 Fed. 247. The estates of five 
out of the seven sureties on an official bond are not released 
by the acceptance of the individual bonds of their co-sure- 
ties, since become insolvent, but the city (the obligee) may 
prove against their estates for the whole debt. In re Blu- 
mer, 13 Fed. 623. 

Interest. 

The accrued interest constitutes part of a debt provable 
against the bankrupt's estate. Sloan v. Lewis, 22 Wall. 
150. But interest accruing subsequently to the time of ad- 
judication is not provable. In re Haake, 2 Sawv. 231, Fed. 
Cas. No. 5,883. If the contract is silent as to interest after 
maturity, the creditor is entitled to interest from that time 
to the date of adjudication by operation of law, and not by 
any provision of the contract. In re Bartenbacli, 11 N. B. 
K. 61, Fed. Cas. No. 1,068. But a creditor seeking to prove 



§ 63) DEBTS WHICH MAY BE PROVED. 217 

his claim against the debtor's estate in bankruptcy stands 
in the position of a plaintiff at law, and the trustee may set 
up usury in defense; hence if, by the state law, the taking 
of usury causes a forfeiture of all interest when the debt is 
put in suit, the same consequence attends the presentation 
in bankruptcy of a claim on which usury has been exacted. 
In re Prescott, 5 Biss. 523, Fed: Gas. No. 11,389. 

Debts Barred hy Limitation. 

A debt or claim against which the statute of limitations has 
run can no longer be said to be "due," "owing," or "payable" 
by the debtor. And hence if a debt (otherwise provable) is 
barred by the statute of limitations of the state where the 
debtor resides, at the time of the adjudication, it cannot be 
proved against his estate in bankruptcy. In re Kingsley, 1 
Low. 216, Fed. Cas. No. 7,819; In re Hardin, 1 N. B. R. 396, 
Fed. Cas. No. 6,048; In re Reed, 6 Biss. 250, Fed. Cas. No. 
11,635; In re Noesen, 6 Biss. 443, Fed. Cas. No. 10,288; la re 
Cornwall, 9 Blatchf. 114, Fed. Cas. No. 3,250. This is also the 
English rule. Ex parte Dewdney, 15 Ves. 479. But on the 
other hand, it is held in Re Bay, 2 Ben. 53, Fed. Cas. No. 
11,589, and In re Shepard, 1 N. B. R. 439, Fed. Cas. No. 
12,753, that a debt, to be barred by limitation so as not to be 
provable in bankruptcy, must be shown to be so barred 
throughout the limits of the United States. In accordance 
with the doctrine of the majority of the cases, it is held that 
a debt which is barred by the statutes of the state where the 
debtor resides and where the petition is filed cannot be proved 
against Ms estate in bankruptcy, though not barred by the 
statutes of the state where the creditor resides and where 
both parties resided when the contract was made. In re 
Kingsley, 1 Low. 216, Fed. Cas. No. 7,819. In the case of 
Nicholas v. Murray, 5 Sawy. 320, Fed. Cas. No. 10,223, Judge 
Deady thought that if the debt was not barred at the time of 
the adjudication, still the statute is not suspended by the 



218 ESTATES. (Ch. 7 

bankruptcy proceedings, but continues to run against the 
debt, and after the term has expired it is no longer provable. 
But the opposite view is supported by the greater weight of 
authority. In re Wright, 6 Biss. 317, Fed. Cas. No. 18,068; 
In re Eldridge, 12 N. B. E. 540, Fed. Cas. No. 4,331; Wof- 
ford V. linger, 53 Tex 634. These last cases hold that a 
debt which was not barred at the time when the petition 
was filed will remain valid against the trustee throughout 
the bankruptcy proceedings, and will be provable at any time 
when offered, notwithstanding the whole time limited by the 
statute has then expired, for the institution of the bank- 
ruptcy proceedings stops the running of the statute. 

nights of Creditor wJienre Several Parties are Liable. 

A creditor who holds commercial paper signed by a firm 
in bankruptcy and indorsed by an individual member of the 
firm, a bankrupt, may prove his debt against both estates 
and share in the dividends of each; because he would have 
had a right of action against each, though entitled to but 
one satisfaction. Emery v. Bank, 3 Cliff. 507, Fed. Cas. No. 
4,446; In re Bigelow, 2 N. B. E. 121, Fed. Cas. No. 1,397; 
In re Howard, 4 N. B. E. 185, Fed. Cas. No. 6,750; Mead 
V. Bank of Fayetteville, 6 Blatchf. 185, 7 Am. Law Eeg. 
(N. S.) 818, Fed. Cas. No. 9,366. Out of a firm consisting of 
four partners, two were insolvent, one was a bankrupt, and 
the fourth paid off and discharged all the firm debts out of 
his separate estate; it was held that he was entitled to prove 
against the separate estate of the bankrupt one-half of the 
amount so paid by him. In re Dell, 5 Sawy. 344, Fed. Cas. 
No. 3,774. Where the firm of A. & B. was indebted to the 
firm of B. & 0., and the former firm became bankrupt, it 
was held that C, as the remaining member of the latter 
firm, settling its affairs, could prove the debt against the 
assets of A. & B. In re Buckhause, 2 Low. 331, Fed. Cas. 
No. 2,086. 



§ 63) DEBTS WHICH MAY BE PROVED. 219 

Who are Creditors within the Act. 

Any person who is authorized to give an acquittance of 
a debt is entitled to prove that debt in bankruptcy. Ex 
parte Norwood, 3 Biss. 504, Fed. Cas. No. 10,364. The bank- 
rupt's wife may prove as a creditor against his estate for 
money realized by him out of property which she held as her 
separate estate, if it clearly appears that the transaction was 
intended as a loan and not as a gift. In re Blandin, 1 
Low. 543, Fed. Cas. No. 1,527. A creditor who resides out 
of the district where the bankruptcy proceedings are taken, 
subjects himself to the jurisdiction of the court by proving 
his debt, and is thereafter bound to obey all the orders of 
the court touching his alleged debt, and the court, in case he 
disobeys its orders, can deprive him of all the benefits of the 
act, and can reject and expunge his claims. In re Kyler, 2 
Ben. 414, Fed. Cas. No. 7,956. The government, in the 
capacity of a creditor, may prove its claims. Where, before 
the commencement of bankruptcy proceedings, the United 
States brought an action against the bankrupts to recover 
the value of goods which had been forfeited for violation of 
the customs revenue laws, and after the adjudication the 
bankrupts admitted the right of the government to recover, 
and a judgment was rendered, it was held that this was a 
provable debt. In re Vetterlein, 13 Blatchf. 44, Fed. Cas. 
No. 16,929. See also Barnes v. U. S., 12 N. B. K. 526, Fed. 
Cas. No. 1,023. A court of bankruptcy may permit the bank- 
rupts themselves, acting in a representative capacity as the 
administrators of an estate, to prove an equitable debt, aris- 
ing from a loan of funds borrowed from the estate of their 
intestate, whether such loan was lawful or not. Warner 
V. Spooner, 3 Fed. 890. Services rendered by counsel for the 
benefit of particular creditors only, and not for all the cred- 
itors of the bankrupt, are not allowable against the estate of 
such bankrupt. In re Baxter, 28 Fed. 452. 



220 ESTATES. (Ch. 7 

Rights of Banh-upfs Surety. 

The surety has a provable claim against the principal's es- 
tate in bankruptcy, although he has not yet paid the debt 
for which he is liable. Lipscomb v. Grace, 26 Ark. 231; 
Mace V. Wells, 7 How. 272; Kyle v. Bostick, 10 Ala. 589; 
Fulwood V. Bushfleld, 14 Pa. St. 90; Tubbs v. Williams, 9 
Ired. 1; Morse v. Hovey, 1 Sandf. Ch. 187; Post v. Losey, 
111 Ind. 74, 12 N. E. 121; Liddell v. Wiswell, 59 Vt. 365, 8 
Atl. 680. See, per contra, Ecker v. Bohn, 45 Md. 278. The 
claim of an iudorser against the principal debtor is a prov- 
able debt, notwithstanding the indorser does not pay the 
note until after the commencement of the bankruptcy pro- 
ceedings. Hardy v. Carter, 8 Humph. 153. Eev. St. § 5070 
settles the question that the payment of a part of a debt 
by a surety does not entitle him to prove the same as a debt 
against the principal until the creditor is paid in full. In 
re Hollister, 3 Fed. 452, distinguishing Downing v. Traders' 
Bank, 2 Dill. 136, Fed. Cas. No. 4,046. 

Fraudulent Conduct or Laches of Creditor hars Proof of , 
Claim. 

Where the creditor included in his proof claims a part of 
which were invalid and some valid, and made his claim in 
this manner intentionally, knowing that only part of it was 
legal, and supported the claim for the whole amount by a 
false oath, it was held that this fraudulent conduct would 
disentitle him to any dividends whatever on any part of his 
claim. Marrett v. Atterbury, 3 Dill. 444, Fed. Cas. No. 9,- 
102. So a claim for money loaned to a debtor to aid him in 
the commission of an act of bankruptcy is not a provable 
debt; to admit it, would simply give legal effect to a fraud. 
In re Hatje, 6 Biss. 436, Fed. Cas. No. 6,215. Where the 
bankrupt's brokers were carrying stocks on a margin, and, 
at the commencement of the bankruptcy proceedings, could 
have sold them out at a profit, but carried the stocks until 



§ 63) DEBTS WHICH MAY BE PUOVED. 221 

a decline and finally sold at a loss, all without application 
to the court, it was held that they could not prove their claim 
for differences against the estate. In re Daniels, 6 Biss. 405, 
Fed. Cas. No. 3,566. On the other hand, where a party whose 
estate will pay fifty cents on the dollar, intending to go into 
bankruptcy, gets a friend to buy up all or a part of his in- 
debtedness at ten cents on the dollar, upon false statements 
of fact as to the amount of dividend his estate will pay, no 
court of bankruptcy would hesitate to hold that an indebt- 
edness thus obliterated by fraud could be proven against the 
bankrupt's estate. In re State Ins. Co., 16 Fed. 756. 

Contingent Demands and Ludjllifies. 

So long as it remains wholly uncertain whether a contract 
or engagement will ever give rise to an actual duty or lia- 
bility, and there is no means of removing the uncertainty by 
calculation, such contract or engagement is not provable in 
bankruptcy. It was so held in regard to a claim for breach 
of a covenant that the grantor had an indefeasible estate in 
fee, the claim arising from the grantor's wife's right of dower, 
both husband and wife being yet alive. Eiggin v. Magwire, 
15 Wall. 549; Mills v. Auriol, 1 Smith's Lead. Cas. (8th Ed.) 
pt. II, p. 1266, American note. The fact that the accounts 
of a guardian with his ward are in course of settlement in 
the probate court does not preclude the ward from proving 
her claim against the guardian's estate in bankruptcy. 
Bourne v. Maybin, 3 Woods, 724, Fed. Cas. No. 1,700. 
Where a judgment-creditor issues process of garnishment, 
and obtains a judgment and makes demand against the gar- 
nishee long after the latter's bankruptcy, such judgment is 
not a debt provable ex parte against the garnishee's estate. 
Ex parte Columbian Ins. Co., 2 Low. 5, Fed. Cas. No. 3,037. 
Every joint debtor has a demand against his co-debtor con- 
tingent upon his being compelled to pay more than his share 
of the debt, and such a demand is provable in bankruptcy. 



222 ESTATES, (Ch., 7 

Dean v. Speakman, 7 Blackf. 317. A loss on a policy of fire 
insurance is a prpvable debt against the estate of the com- 
pany in bankruptcy, although the loss occurred after the ad- 
judication, if proof is made before a final dividend. In Ee 
American Plate Glass Co., 12 N. B. R. 56, Fed. Gas. No. 314. 
A note deposited with a third person for the sole purpose of 
enabling the creditor to determine whether he will elect to 
abide by a certain contract and receive the note, is a con- 
tingent demand. Spalding t. Dixon, 21 Vt. 45. A liability 
as bail is a provable claim against the bankrupt's estate, if 
the liability became fixed before the final dividend was de- 
clared. Houston V. State, 34 Tex. 542. The contingent lia- 
bility of a surety on a guardian's bond is provable against 
him. Davis v. McCurdy, 50 Wis. 569, 7 N. W. 665. 

Privileges of an Unexpired Contract. 

A lessee, whose goods were under distraint for rent, made 
an assignment for the benefit of creditors. The assignee, 
while disclaiming any interest in the lease, made an arrange- 
ment with the lessor by which the distress was withdrawn, 
he promising to pay the rent then in arrear, and all rent 
which should accrue during his occupancy of the premises, 
and to inform the lessor when he would vacate. About two 
months afterwards he vacated the premises, sending the key 
to the lessor and paying the rent up to that day. The lessor 
thereupon re-entered and rented the premises to other parties 
for a less rent. On this state of facts it was held that there 
was neither an eviction of the tenant nor a surrender of the 
lease, and that the lessor was entitled to prove against the 
lessee's estate in bankruptcy for damages for the breach of 
the covenant in the lease to pay the subsequently accruing 
rent. In re Orne, 12 Fed. 779, 



§ 63) DEBTS WHICH MAY BE PROVED. 223 

Landlord'' s Rights and Remedies. 

A landlord cannot prove, as a claim against the bank- 
rupt's estate, a demand for rent which accrued after the 
bankruptcy; but if either the bankrupt or the trustee con- 
tinues to occupy the leased premises after the bankruptcy, he 
is personally liable for the rent, and the lessor has the usual 
lien on goods on the premises. In Ee Commercial Bulletin 
Co., 2 Woods, 220, Fed. Cas. No. 3,060. If the trustee elects 
to take a term belonging to the bankrupt under a lease, he 
takes it with the burden of the accruing rent, and not mere- 
ly with the obligation to pay from the time he begins to oc- 
cupy. Ex parte Faxon, 1 Low. 404, Fed. Cas. No. 4,704. An 
express provision in a lease whereby the lessee gives to the 
lessor a lien on specified personal property used by the for- 
mer upon the demised premises, when not in conflict with 
any statute, is valid against the lessee and his trustee in bank- 
ruptcy. McLean v. Klein, 3 Dill. 113, Fed. Cas. No. 8,884. 
So also a lease which, by its terms, cannot be assigned with- 
out the written consent of the landlord, is cancelled by the 
bankruptcy. In re Breck, 8 Ben. 93, Fed. Cas. No. 1,822. 

ClaiTns for Torts and Penalties. 

The present statute provides that "unliquidated claims" 
against the bankrupt may be proved in bankruptcy, after be- 
ing liquidated by the court. It was otherwise under the 
bankrupt act of 1867. Under that statute it was held that 
a claim for damages for a tort of a purely personal charac- 
ter, such as assault, slander, or deceit, was not a debt prov- 
able in bankruptcy. In re Hennocksburgh, 6 Ben. 150, Fed. 
Cas. No. 6,367; In re Schuchardt, 8 Ben. 585, Fed. Cas. No. 
12,483. In the case of the Boston & Fairhaven Iron Works, 
29 Fed. 783, it was held that a claim for an account of profits 
against an infringer of a patent-right was provable against 
his estate in bankruptcy. This decision was reversed in the 
circuit court (23 Fed. 880) by Colt, J., on the ground that the 



224 ESTATES. (Ch. 7 

claim was one for unliquidated damages for a tort, and there- 
fore not provable. But under the present state of the law, 
the original decision must now be regarded as good, and not 
the ruling of the circuit court. See also Watson v. Holliday, 
20 Ch. Div. 780. A judgment in favor of the state for a fine 
imposed upon the bankrupt as a punishment for the commis- 
sion of a crime of which he had been duly convicted was not 
a provable debt. In Be Sutherland, Deady, 416, Fed. Gas. 
No. 13,639. If, however, a claim sounding in tort has been 
reduced to judgment before the institution of bankruptcy 
proceedings against the defendant, it is so far merged in the 
judgment as to be no longer excluded from proof against his 
estate. In other words, a judgment existing against the 
bankrupt at the time the petition is filed is a provable debt 
against his estate, irrespective of whether the cause of ac-. 
tion upon which the judgment was founded arose out of a 
tort or a contract. Howland v. Carson, 28 Ohio St. 625; 
Hays V. Ford, 55 Ind. 52. But if the adjudication in bank- 
ruptcy intervenes between the rendition of a verdict and the 
entry of judgment upon it, the debt was held not provable. 
Zimmer v. Schleehauf, 115 Mass. 52; Ex parte Charles, 14 
East, 197; Black v. McClelland, 12 N. B. K. 481, Fed. Cas. 
No. 1,462. "Where a claim originates in contract, although 
fraudulently induced, and is prosecuted in an action sound- 
ing in damages, it continues to constitute a provable debt, 
even though the fraud must be proved to entitle the plaintiff 
to a recovery." In re Schwartz, 14 Blatch. 196, Fed. Cas. 
No. 12,502. But a liability by reason of the wrongful con- 
version of chattels by the bankrupt is provable. Cole v. 
Eoach, 37 Tex. 413. 



§ 64) DEBTS WHICH HAVE PRIORITY. 225 



DEBTS WHICH HAVE PEIOEITY. 

§ 64. a The court shall order the trustee to pay- 
all taxes legally due and owing by the bankrupt 
to the United States, state, county, district, or mu- 
nicipality in advance of the payment of dividends 
to creditors, and upon filing the receipts of the 
proper public officers for such payment he shall be 
credited vrith the amount thereof, and in case any 
question arises as to the amount or legality of any 
such tax the same shall be heard and determined 
by the court. 

b The debts to have priority, except as herein 
provided, and to be paid in full out of bankrupt 
estates, and the order of payment shall be (1) the 
actual and necessary cost of preserving the estate 
subsequent to filing the petition; (2; the filing fees 
paid by creditors in involuntary cases; (3) the cost 
of administration, including the fees and mileage 
payable to w^itnesses as now or hereafter provided 
by the law^s of the United States, and one reason- 
able attorney'^iee, for the professional services 
actually rendered, irrespective of the number of 
attorneys employed^ to the petitioning creditors in 
involuntary cases,- to the bankrupt in involuntary 
cases "wrhile performing the duties herein prescribed, 
and to the bankrupt in voluntary cases, as the 
court may allow; (4) -wages due to workmen, clerks, 
or servants -which have been earned within three 
months before the date of the commencement of 
proceedings, not to exceed three hundred dollars 
to each claimant; and (5) debts owing to any per- 

BL. BANK.— 15 



226 ESTATES. (Ch. 7 

son who by the laws of the states or the United 
States is entitled to priority. 

c In the event of the confirmation of a composition 
being set aside, or a discharge revoked, the prop- 
erty acquired by the bankrupt in addition to his 
estate at the time the composition -was confirmed 
or the adjudication w^as made shall be applied to 
the payment in full of the claims of creditors for 
property sold to him on credit, in good faith, w^hile 
such composition or discharge w^as in force, and the 
residue, if any, shall be applied to the payment of 
the debts which w^ere owing at the time of the ad- 
judication. 

Priority of the United States. 

The pi-esent bankruptcy law, it will be observed, does not 
expressly grant a priority of payment to debts due the 
United States, except in the case of taxes. But it accords 
such a priority to "debts owing to any person who by the 
laws of the states or the United States is entitled to priori- 
ty." Now an earlier act of congress provides that, whenev- 
er any person indebted to the United States is insolvent, 
or whenever the estate of any deceased debtor, in the hands 
of the executors or administrators, is not sufficient to pay all 
the debts due from the deceased, the debts due to the United 
States shall- be first satisfied, and the priority thereby es- 
tablished shall extend as well to cases in which a debtor, 
not having sufficient property to pay all his debts, makes a 
voluntary assignment thereof, or in which the estate and ef 
fects of an absconding, concealed, or absent debtor are at- 
tached by process of law, as to cases in which an act of 
bankruptcy is committed. Rev. St. U. S. § 34CC. And see 
Lewis V. U. S., 92 U. S. G18. The courts are not likely to 
hold that this statute is repealed, by implication, by the 
bankruptcy law. On the contrary, the two acts are to be 



I 64) DEBTS WHICH HAVE PRIORITY. 227 

read together as in pari materia; and tlie priority of debts 
due the government should be regarded as established h^ 
law, to the same extent as if the provisions of the earlier 
statute were incorporated in this section of the bankruptcy 
law. 

Where a bankrupt firm, through fraudulent undervalua- 
tions of goods entered at the custom-house, has, incurred a 
forfeiture of their value to the United States, the claim of 
the latter against the firm for the tort is joint and several; 
and upon proof of the debt, containing a statement of the 
facts, the United States is entitled, under sections 5501 and 
346G of the Ee vised Statutes, to priority of payment out of 
any of the proceeds of either the joint or several estates, 
without i^eference to what may be the particular claim of 
priority in its proof of debt'. In re Vetterlein, 20 Fed. 109. 
The right of priority of the United States extends to debts 
of every kind, including the indorsement of a bill of ex- 
change of which the government is the holder. U. S. v. 
Pisher, 2 Cranch, 358, Fed. Gas. No. 14,720. It extends as 
well to equitable as to legal debts. Howe v. Sheppard, 
2 Sumn. 133, Fed. Gas. No. 6,772. It includes a penalty in- 
curred for a violation of the internal revenue laws. In Ee 
Eosey, 6 Ben. 507, Fed. Gas. No. 12,000. So the government 
is entitled to priority of payment out of the effects of the 
bankrupt whether he be principal or surety, or be solely lia- 
ble, or jointly with others, and it is immaterial where the 
debt was contracted. Lewis v. U. S., 92 U. S. 618. But 
this right of priority is not in the nature of a lien. U. S. 
V. Hooe, 3 Granch, 73; U. S. v. Mechanics' Bank, Gilp. 51, 
Ped. Gas. No. 15,756; and the right is only to priority of pay^ 
ment out of the genercd estate, so that the government has 
no right to preference over the holder of a valid lien. The 
Thomas Scattergood, Gilp. 1, Fed. Gas. No. 11,106. It has 
been held that if the government holds a claim against a 
■debtor in bankruptcy, and with knowledge of the bankrupt- 



228 ESTATES. (Ch. 7 

cy i)roceedings fails to prove its claim or have it allowed in 
some form, it cannot assert any rights against the trustee 
after the estate is fully administered and the fund distrib- 
uted under orders of court. U. S. v. Murphy, 11 Biss. 415, 
15 Fed. 589. But the better opinion appears to be that the 
trustee in bankruptcy becomes a trustee for the United 
States, and when. he has notice of the debt due the govern- 
ment, he cannot escape personal liability for the amount 
of it, to the extent of the value of the assets coming to his 
hands, if he fails to provide for it before making distribu- 
tion to other creditors. The judgment of a court of compe- 
tent jurisdiction, directing such distribution, will afford 
the trustee no justification in such a case, where it does not 
appear that the United States was made a party to the pro- 
ceedings in which such judgment was rendered. The gov- 
ernment, by omitting to prove its claim in the bankruptcy 
proceedings until after such distribution is made, does not 
Icse its right to proceed against the trustee personally. 
The doctrines of waiver, laches, and estoppel cannot be in- 
voked against the sovereign. U. S. v. Barnes, 31 Fed. 705; 
Field V. U. S., 9 Pet. 182; Lewis v. U. S., 92 U. S. 618. When 
a person ]iays the duty on an imported article, in order to 
get it out of the bonded warehouse, he will be subrogated 
to the rights of the United States against the failing sure- 
ties. In re Chase, 14 N. B. E. 139, Fed. Cas. No. 7,843. 

DehU Due a State. 

A judgment recovered by the state of New York against a 
surety in a bail-bond given for the appearance of a person in- 
dicted for a crime, is a debt due the state and entitled to pri- 
ority. In Ee Chamberlain, 9 Ben. 149, Fed. Cas. Xo. 2,580. 
So a debt due the state \ipon a contract for the employment 
of convict labor is entitled to priority of payment. In Ee 
Southwestern Car Co., 9 Biss. 76, Fed. Cas. No. 13,192. But 
where the warden of a state penitentiary deposits funds in his. 



§ 64) DEBTS WHICH HAVE PRIORITY. 229 

own name, as warden, in a bank which afterwards becomes 
Insolvent, the warden being liable to the state on his bond 
for the amount, the state has no claim to priority of payment. 
In re Corn Exchange Bank, 7 Biss. 400, Fed. Cas. No. 3,242. 

Wages and Other Claims. 

Orders for goods, drawn by a manufacturing compaiiy in 
favor of their employes, are not preferred claims in the hands 
of the drawee, against the estate of the bankrupt company. 
In re Erie Rolling Mill Co., 1 Fed. 585. Where the bankrupt 
is indebted to several laborers, and one person loans each of 
them a certain sum, agreeing to collect their dues and pay 
himself out of the same, and takes an absolute assignment of 
their claims, his demand against the employer's estate in 
bankruptcy, for the amounts so advanced, will be entitled 
to priority. In re Brown, 4 Ben. 142, Fed. Cas. No. 1,974. 
But an attorney's claim for legal services in preparing the pe- 
tition and schedules, and for advice in relation thereto, and 
for disbursements, is not a privileged debt. In re Hirsch- 
berg, 2 Ben. 466, Fed. Cas. No. 6,530. Where, by the state 
statute, mechanics' liens relate back to the commencement of 
the building, there can be no priority among the mechanics ; 
they all stand upon the same footing and are to be paid in full 
or pro rata as the funds may suffice. In re Hoyt, 3 Biss. 436, 
Fed. Cas. No. 6,805. 



230 ESTATES. (Ch. 7 

DECLARATION AND PAYMENT OF DIVIDENDS. 

§ 65. a Dividends of an equal per centum shall 
be declared and paid on all allow^ed claims, except 
such as have priority or are secured. 

h The first dividend shall be declared within 
thirty days after the adjudication, if the money of 
the estate in excess of the amount necessary to pay 
the debts -which have priority and such claims as 
have not been, but probably ■will be, allow^ed equals 
five per centum or more of such allow^ed claims. 
Dividends subsequent to the first shall be declared 
upon like terms as the first and as often as the 
amount shall equal ten per centum or more and 
upon closing the estate. Dividends may be de- 
clared ofteaer and in smaller proportions if the 
judge shall so order. 

c The rights of creditors -who have received divi- 
dends, or in \nrhose favor final dividends have been 
declared, shall not be affected by the proof and al- 
lowance of claims subsequent to the date of such 
payment or declarations of dividends; but the cred- 
itors proving and securing the allow^ance of such 
claims shall be paid dividends equal in amount to 
those already received by the other creditors if the 
estate equals so much before such other creditors 
are paid any further dividends. 

d Whenever a person shall have been adjudged 
a bankrupt by a court without the United States 
and also by a court of bankruptcy, creditors resid- 
ing within the United States shall first be paid a 
dividend equal to that received in the court with- 
out the United States by other creditors before 



§ 66) UNCLAIMED DIVIDENDS. 231 

creditors who have received a dividend in such 
court shall be paid any amounts. 

e A claimant shall not be entitled to collect from, 
a bankrupt estate any greater amount than shall 
accrue pursuant to the provisions of this act. 

UNCLAIMED DIVIDENDS. 

§ 66. a Dividends ■which remain unclaimed for 
six months after the final dividend has been de- 
clared shall be paid by the trustee into court. 

b Dividends remaining unclaimed for one year 
shall, under the direction of the court, be distrib- 
uted to the creditors w^hose claims have been 
allowed but not paid in full, and after such claims 
have been paid in full the balance shall be paid to 
the bankrupt : prodded, that in case unclaimed divi- 
dends belong to minors such minors may have one 
year after arriving at majority to claim such divi- 
dends. 

Practice in Hegard to Dividends. 

The making or payment of dividends will be restrained in 
proper cases until furtlier order of court, that an opportunity 
may be given to any person interested to apply to the court, 
on proper papers and proper notice, to vacate the order for 
the dividend. In re New York Mail S. S. Co., 3 N. B. E. 73, 
Fed. Cas. No. 10,212. But the distribution of the assets of a 
bankrupt cannot be stayed or prevented by the process of a 
state court. In re Bridgman, 2 N. B. R. 252, Fed. Cas. No. 
1,867. A dividend which has been ordered but remains in 
the hands of the trustee is not attachable on process from a 
state court; it remains a part of the estate of the bankrupt 
in the custody of the court; it is not property of the creditor, 



232 ESTATES. (Ch. 7 

but only property that will become his when he shall receive 
it; he could not maintain a suit against the trustee for it, 
nor obtain it by any legal process other than by application 
to the bankruptcy court. Gilbert v. Lynch, 17 Blatchf. 402, 1 
Fed. 111. The trustees of an estate in bankruptcy are not 
bound to pay interest upon dividends which may be declared 
upon debts which have been fairly and reasonably disputed, 
from the time that like dividends were declared upon undis- 
puted debts, although it seems that they may be ordered to 
pay such interest as has been earned upon funds set apart to 
meet the disputed claim. Hersey v. Fosdick, 20 Fed. 44. 
Upon the final settlement of a bankrupt's estate, it appeared 
that two dividends, amounting to 27 per cent, had been de- 
clared, and that at the time each was made a sum was re- 
tained under section 5092, Rev. St., "sufficient for all unde- 
termined claims which, by reason of the distant residence of 
creditors, etc., had not been proved," etc. ; that afterwards a 
third dividend of ten per cent, was declared upon claims that 
had not participated in the first and second dividends ; that 
some claims which had been proven before the first and sec- 
ond dividends did not share therein, although there were then 
sufficient funds to have paid upon them also a 27 per cent, 
dividend ; and that no fund was specially reserved for their 
payment; and that the funds remaining were not sufficient 
to pay upon such claims, and claims since proved, a dividend 
equal to 27 per cent. Upon this state of facts it was held 
that the funds remaining should be distributed as follows: 
first, costs and expenses ; second, ten per cent, to creditors 
that have received no dividend; third, 17 per cent, to those 
who have received, and shall, under this order, receive, 10 
per cent. ; and if the fund is insufficient to pay 17 per cent., 
then it is to be distributed to them pro rata. In re Hovey, 
5 Fed. 356; affirmed, First Nat. Bank v. Hovey, 8 Fed. 314. 
It will be observed that section 58 of the present act provides 
for notices to creditors of all payments of dividends. 



§ 67) LIENS, 



LIENS. 



§ 67. a Claims ■which for want of record or for 
other reasons -wrould not have beeij valid liens as 
against the claims of the creditors of the bankrupt 
shall not be liens against his estate. 

h Whenever a creditor is prevented from enfor- 
cing his rights as against a lien created, or attempt- 
ed to be created, by his debtor, who afterwards 
becomes a bankrupt, the trustee of the estate of 
such bankrupt shall be subrogated to and may en- 
force such rights of such creditor for the benefit of 
the estate. 

c A lien created by or obtained in or pursuant 
to any suit or proceeding at law or in equity, in- 
cluding an attachment upon mesne process or a 
judgment by confession, w^hich Mnas begun against 
a person w^ithin four months before the filing of a 
petition in bankruptcy by or against such person 
shall be dissolved by the adjudication of such per- 
son to be a bankrupt if (1) it appears that said lien 
w^as obtained and permitted while the defendant 
w^as insolvent and that its existence and enforce- 
ment will w^ork a preference, or (2) the party or 
parties to be benefited thereby had reasonable 
cause to believe the defendant w^as insolvent and in 
contemplation of bankruptcy, or (3) that such lien 
was sought and permitted in fraud of the provi- 
sions of this act; or if the dissolution of such lien 
w^ould militate against the best interests of the es- 
tate of such person the same shall not be dissolved, 
but the trustee of the estate of such person, for the 
benefit of the estate, shall be subrogated to the 



234 ESTATES. (Ch 7 

rights of the holder of such lien and empo-wrered to 
perfect and enforce the same in his name as trustee 
■with like force and effect as such holder might have 
done had not bankruptcy proceedings intervened. 

d Liens given or accepted in good faith and not 
in contemplation of or in fraud upon this act, and 
for a present consideration, -which have been re- 
corded according to la-w, if record thereof -was neces- 
sary in order to impart notice, shall not be affected 
by this act. 

e That all conveyances, transfers, assignments^ 
or incumbrances of his property, or any part there- 
of, made or given by a person adjudged a bank- 
rupt under the provisions of this act subsequent to 
the passage of this act and -within four months 
prior to the filing of the petition, -with the intent 
and purpose on his part to hinder, delay, or de- 
fraud his creditors, or any of them, shall be null 
and void as against the creditors of such debtor, 
except as to purchasers in good faith and for a 
present fair consideration; and all property of the 
debtor conveyed, transferred, assigned, or encum- 
bered as aforesaid shall, if he be adjudged a bank- 
rupt, and the same is not exempt from execution 
and liability for debts by the la-w of his domicile, 
be and remain a part of the assets and estate of 
the bankrupt and shall pass to his said trustee, 
■whose duty it shall be to recover and reclaim the 
same by legal proceedings or other-wise for the ben- 
efit of the creditors. And all conveyances, trans- 
fers, or incumbrances of his property made by a 
debtor at any time within four months prior to the 
filing of the petition against him, and -while insol- 



§ 67) LIENS. 235 

vent, -which are held null and void as against the 
creditors of such debtor by the laws of the state, 
territory, or district in -which such property is 
situate, shall be deemed null and void under this 
act against the creditors of such debtor if he be 
adjudged a bankrupt, and such property shall pass 
to the assignee and be by him reclaimed and re- 
covered for the benefit of the creditors of the bank- 
rupt. ' 

/ That all levies, judgments, attachments, or other 
liens, obtained through legal proceedings against a 
person -who is insolvent, at any time \vithin four 
months prior to the filing of a petition in bank- 
ruptcy against him, shall be deemed null and void 
in case he is adjudged a bankrupt, and the prop- 
erty affected by the levy, judgment, attachment, 
or other lien shall be deemed wholly discharged 
and released from the same, and shall pass to the 
trustee as a part of the estate of the bankrupt, un- 
less the court shall, on due notice, order that the 
right under such levy, judgment, attachment, or 
other lien shall be preserved for the benefit of the 
estate; and thereupon the same may pass to and 
shall be preserved by the trustee for the benefit of 
the estate as aforesaid. And the court may order 
such conveyance as shall be necessary to carry the 
purposes of this section into effect: prodded, that 
nothing herein contained shall have the effect to 
destroy or impair the title obtained by such levy, 
judgment, attachment, or other lien, of a bona fide 
purchaser for value who shall have acquired the 
same -without notice or reasonable cause for in- 
quiry. 



236- i;siATi.:s. (Ch. 7 

Lieiis Voidable ly Trustee. 

A trustee in bankruptcy has all the rights of creditors to 
attack conveyances made by the bankrupt in fraud of his 
creditors. Crooks v. Stewart, 7 Fed. 800. A mortgage 
which, though valid as between mortgagor and mortgagee, 
is void as against creditors, for want of record, is voidable by 
the trustee, who represents the creditors. Moore v. Young, 
4 Biss. 128, Fed. Cas. No. 9,782. And so, mortgages and 
bills of sale of personal property which are void as to cred- 
itors under the statute of frauds of the state where the trans- 
actions occur, are void as to the trustee in bankruptcy. Ed- 
mondson v. Hyde, 2 Sawy. 205, Fed. Cas. No. 4,285; In re 
Morrill, 2 Sawy. 357, Fed. Cas. No. 9,821. Where a cred- 
itor obtains judgment on a debt not yet due, and thereby ob- 
tains a lien by levy on the debtor's goods, although this may 
not amount to a statutory preference, yet the lien will not 
hold against the trustee in bankruptcy of the debtor ; for he 
takes the property subject to lawful incumbrances only, and 
he may inquire into the lawfulness of all judgments, because 
he represents creditors, and therefore is not in privity with 
the debtor so far as to be prohibited from collaterally at- 
tacking judgments against him. Partridge v. Dearborn, 2 
Low. 280, Fed. Cas. No. 10,785. Where a chattel mortgage 
given by the bankrupt is not filed as required by the stat- 
ute, but is otherwise unexceptionable, it is valid as between 
mortgagor and mortgagee, but voidable by execution cred- 
itors; hence, in a controversy concerning the fund in court 
arising from the sale of the property covered by such mort- 
gage, between the trustee in bankruptcy of the mortgagor, 
the mortgagee, and certain execution-creditors, the creditors 
are to be paid first, and the balance, if any, belongs to the 
mortgagee, because the trustee takes subject to all valid 
liens and incumbrances, and this, as between mortgagor and 
mortgagee, was such. Stewart v. Piatt, 101 U. S. 731. 



§ 67) LIENS. 237 

Trustee Talces Subject to Liens and Incumlrances. 

Except in the instances specified in the act, — liens void 
for want of record or otherwise, liens ipso facto dissolved 
by the adjudication, and fraudulent and voidable transfers, 
— the trustee in bankruptcy takes the property of the estate 
subject to all equities, liens, and incumbrances existing 
against it in the hands of the bankrupt, and takes no greater 
interest than the bankrupt himself had. Mattocks v. Baker, 
2 Fed. 45ij; Yeatman v. Savings Inst., 95 U. S. 764; Ex parte 
Dalby, 1 Low. 431, Fed. Gas. No. 3,540; Stewart v. Piatt, 
101 U. S. 731. Where a bill is filed by a junior mortgagee 
for the foreclosure or sale of the equity of redemption, nei- 
ther the mortgagor nor his trustee in bankruptcy has any 
standing to object to the order in which the priority of valid 
and subsisting liens on the mortgaged property is fixed by 
the decree of foreclosure; for the trustee can get nothing in 
any event until all valid liens have been removed. Jerome 
V. McCarter, 94 U. S. 734. The trustee cannot avail himself 
of a claim that an execution was dormant at the time of the 
vesting of the property in him, if the bankrupt could not. 
Crane v. Penny, 2 Fed. 187. If a creditor of a bankrupt, hav- 
ing a valid lien upon certain of his property, does not prove 
his claim in the bankruptcy, and the property upon which he 
has the lien is not included by the bankrupt in his schedules, 
the lien survives the bankruptcy proceedings. Clanton v. 
Estes, 77 Ga. 352, 1 S. E. 163. The acquisition of title by 
the trustee relates back to the commencement of the bank- 
ruptcy proceedings, and, by operation of law, dissolves any 
attachment sued out within the four months next preceding 
their commencement, without any action on the part of the 
court in which the attachment suit is pending. Sullivan v. 
Eabb, 86 Ala. 433, 5 South. 746. Where a trustee in bank- 
ruptcy avoids, as a preference, an execution larger in amount 
than the value of the goods levied on, he is entitled to the 
goods or their proceeds as against an execution levied after- 



238 ESTATES. (Ch. 7 

the preferential execution but before the filing of the peti- 
tion in bankruptcy. Claridge v. Kulmer, 1 Fed. 399. 

lAen of Judgm.ents. 

The lien of a valid judgment obtained against the debtor 
a sufficient period before the commencement of proceedings 
in bankruptcy is piotected under the bankrupt act and is 
good against the trustee. Webster v. Woolbridge, 3 Dill. 
74, Fed. Cas. No. 17,340. In a case where an insolvent per- 
son made a fraudulent conveyance of his property to trus- 
tees with intent to hinder and delay his creditors; and cer- 
tain of the creditors, not assenting to this transaction, sued 
the debtor and recovered judgments, — which, by the law of 
the state, they could do without first having the fraudulent 
conveyance set aside, — and these judgments, being duly dock- 
eted, became liens on the debtor's property; and afterwards 
he was adjudged a bankrupt, the bankruptcy court declared 
the conveyance to trustees to be void, and the trustees con- 
veyed the property to the assignee in bankruptcy; it was 
held that the assignee took the property subject to the lien 
of those judgments. In re Beadle, b Sawy. 351, Fed. Cas. 
No. 1,155. And it seems that the same would be true of the 
lien of an execution in the hands of the sheriff, by the local 
law, when created more than four months before the bank- 
ruptcy. See In re Weeks, 2 Biss. 259, Fed. Cas. Xo. 17,350. 
It is competent for a state to provide that the lien of a judg- 
ment, in a certain class of cases shall relate back to the in- 
stitution of the suit, and the bankrupt law preserves such 
lien. Voyles v. Parker, 9 Biss. 326, 4 Fed. 210. But where 
the creditor has reasonable cause to believe his debtor insol- 
vent, he acquires no valid lien by taking a confession of judg- 
ment. In re Terry, 2 Biss. 356, Fed. Cas. No. 13,835. And 
a judgment recovered against a person after he is adjudged 
a bankrupt becomes no lien on his lands. Burgett v. Pax- 
ton, 99 111. 288. 



§ 67) LIENS. 239 

Mortgages. 

So also a mortgage, whether of realty or chattels, exe- 
cuted by the debtor in good faith and without circumstances 
of fraud, and complying with all the statutory requisites, 
creates an incumbrance on the property which must be rec- 
ognized by the bankruptcy court in disposing of the pro- 
ceeds. In re Collins, 8 Ben. 59, Fed. Gas. No. 3,004. And 
a mortgage to secure future advances is good as against the 
trustee in bankruptcy for the amount of advances actually 
made thereon. Schulze v. Bolting, 8 Biss. 174, Fed. Gas. 
No. 12,489. A covenant for insurance, in the mortgage, 
creates a specific equitable lien upon the insurance money 
which is valid as against a trustee. In re Sands Ale Brew- 
ing Go., 3 Biss. 175, Fed. Gas. No. 12,307. 

Statutory Liens. 

It is entirely within the power of a state legislature to 
create classes of liens by statutory enactments, in respect of 
property within the state, and such liens, being otherwise 
valid, will be protected in the bankruptcy courts. In re 
Burt, 12 Blatchf. 252, Fed. Gas. No. 2,209. But a lien which 
derives its existence wholly from a state statute, and the con- 
tinuance of which is made to depend, by the terms of the 
statute, upon the institution of a suit in the state court in 
respect to the subject-matter within a prescribed period, is 
not preserved as a living incumbrance upon the bankrupt's 
estate, when no such action has been commenced, and no 
step has been taken in the bankruptcy court equivalent to 
such suit, within the time limited; for the mere commence- 
ment of bankruptcy proceedings is not a sufficient compli- 
ance with the terms of the statute. In re Brunquest, 7 Biss. 
208, Fed. Gas. No. 2,055. A national bank has power to 
enact a by-law creating a lien on the stock of every stock- 
holder for his liabilities to the bank, and such lien is not 



240 ESTATES. (Ch. 7 

divested by the subsequent bankruptcy of the stockholder. 
In re Dunkerson, 4 Biss. 227, Fed. Gas. No. 4,156. 

Other Liens. 

The lien of a factor for advancements, charges, and com- 
missions, is within the protection of the bankrupt law. In 
re Roseberry, 8 Biss. 112, Fed. Gas. No. 12,052. The land- 
lord's right to distrain for rent does not, strictly speaking, 
give him a lien on the goods subject to distress, but yet it 
may fairly be classed as a lien so far as to be protected in 
bankruptcy proceedings. Austin v. O'Eeilly, 2 Woods, 670, 
Fed. Gas. No. 665. 

Mechanics^ Liens. 

Where a mechanic's lien, by the local law, arises from the 
doing of the work and attaches to the building from that 
time, upon the condition subsequent that the lien-creditor file 
a certain notice within a given time from the completion of 
the building, such lien is not affected or impaired by the com- 
mencement of bankruptcy proceedings between the doing of 
the work and the filing of such notice. In re Goulter, 2 
Sawy. 42, Fed. Gas. No. 3,276. But where, by the local law, 
the lien is created by the filing of such notice, and not by the 
mere performance of the labor, and bankruptcy proceedings 
intervene between the doing of the work and the filing of 
notice, the property passes to the trustee free of any such 
lien. In re Dey, 3 N. B. E. 305, Fed. Gas. No. 3,870. 

Mights of Semred Creditors. 

Where a creditor of a bankrupt holds two classes of se- 
curity for his debt, to one of which the other creditors have 
no recourse, the court, in its power to marshal assets, will 
require him to first exhaust that class of securities from 
which Ihe other creditors are excluded. In re SauthofE, 14 
N. B. K. 304, Fed. Gas. No. 12,379. The general rule is thus 



§ 67) LIENS. 241 

stated by Woods, J., in Wicks v. Perkins, 1 Woods, 383, Fed. 
Cas. No. 17,615: "A secured creditor can resort to one of 
these remedies: (1) He may rely upon his security. (2) He 
may abandon it and prove the whole debt as unsecured, or, 
(3) he may be admitted only as a creditor for the balance re- 
maining after the deduction of the value of the security. If 
he takes either of the two courses last named, he must of 
course prove his debt. But suppose he chooses to rely upon 
his security; there is no positive provision, nor is there any- 
thing in the policy of the bankrupt law, requiring proof of 
the debt, unless he seeks the aid of the bankrupt court to en- 
force his lien." So where a creditor has obtained judgment 
in a state court prior to the institution of bankruptcy pro- 
ceedings against the debtor, which judgment is a lien on 
realty, the lien is not lost by a failure, on the part of the 
creditor, to prove his judgment in the bankruptcy. Cottrell 
V. Pierson, 2 McCrary, 390, 12 Fed. 805. A moilgage is a 
security \^tliin the meaning of the act; and mortgagees who 
prove their debt in the bankruptcy proceedings become cred- 
itors of the mortgagor's general estate only for the balance 
of the debt after deducting the value of the mortgaged prop- 
erty, to be ascertained by agreement, sale, or in such other 
manner as the bankruptcy court may direct. McHenry v. 
Societe Francaise, 95 U. S. 58. If a person has a judgment 
for his debt, and proves the debt in bankruptcy without nam- 
ing the judgment, he will be held to intend to waive, dis- 
charge, and surrender the judgment and any lien acquired 
under it; otherwise, if he proves the judgment itself. Sedg- 
wick V. Stewart, 9 Ben. 433, Fed. Cas. No. 12,625. A se- 
cured creditor has not an absolute control of his securities; 
the court, on the application of the trustee, will interfere and 
stop a sale, if there is danger that the securities may be sacri- 
ficed. The Skylark, 4 Biss. 388, Fed. Cas. No. 12,929. Where 
a mortgage creditor of a bankrupt, after notice to the trustee, 
asks for and obtains an order of the court allowing him to 
BL. BANK.— 10 



242 ESTATES. (Ch. 7 

foreclose his mortgage by a proceeding in the state court, the 
trustee being made a party, and the complaint praying that 
the deficiency arising upon a sale of the mortgaged prem- 
ises be ascertained and the plaintiff permitted to prove the 
same in the bankruptcy, and no objection is made until the 
creditor files proof of the amount of deficiency in the bank- 
rupt court, his action will be considered as sufficiently com- 
plying with the provisions of the law regulating the course 
to be pursued by secured creditors. In re Letchworth, 18 
Fed. 822. Although secured creditors may collect from the 
trustee interest on their claims accruing after adjudication, 
such interest will not be estimated in determining the rela- 
tive amount of debts and value of assets on the question of 
discharge, but the claims will be reckoned with interest only 
to the date of adjudication. In re Hyndman, 5 Fed. 705. 

Who are not Secured Creditor's. 

The act provides (section 1) that " 'secured creditor' shall 
include a creditor who has security for his debt upon the 
property of the bankrupt, of a nature to be assignable under 
this act, or who owns such a debt for which some indorser, 
surety, or other person secondarily liable for the bankrupt 
has such security upon the bankrupt's assets." Also under 
the bankrupt law of 1867, the security was required to be 
upon the bankrupt's property. Rev. St. § 5075. In view of 
this limitation it was held that a guaranty given by a third 
person is not such a security that the creditor must surren- 
der it to the trustee if he desires to prove his debt in full. In 
re Anderson, 7 Biss. 233, Fed. Gas. No. 350. Neither is an 
indorsement of a promissory note, of which the bankrupt is 
maker. In re Broich, 7 Biss. 303, Fed. Gas. No. 1,921. On 
the same principle it was said: "The court is of opinion that 
a judgment-creditor of the bankrupt, whose judgment is a 
lien upon any estate so sold and conveyed by the bankrupt 
[i. e., to a bona fide purchaser for a valuable consideration 



§ 68) SET-OFFS AND COUNTERCLAIMS. 243 

fully paid prior to the act of bankruptcy], may claim and se- 
cure in the proceeding in bankruptcy his portion of the estate 
of the bankrupt, in virtue of his said judgment, without ac- 
counting or giving credit for anything on account of the lien 
of his judgment upon the estate so sold and conveyed as 
aforesaid." McAden v. Keen, 30 Grrat. 402. And a creditor 
of a bankrupt firm who holds security upon the separate 
estate of one of the partners, may prove his entire claim 
against the joint estate without releasing his • security, even 
though the partner whose individual property affords the 
security owes no separate debts. In re Thomas, 8 Biss. 139, 
Fed. Cas. No. 13,886. Creditors who hold security for their 
claims on property not the bankrupt's may prove the entire 
debt as unsecured. In re Dunkerson, 12 N. B. R. 413, Fed. 
Cas. No. 4,157. 

SET-OFFS AND COUNTERCLAIMS. 

§ 68. a In all cases of mutual debts or mutual 
credits bet-ween the estate of a bankrupt and a cred- 
itor the account shall be stated and one debt shall 
be set off against the other, and the balance only 
shall be allo-wed or paid. 

h A set-off or counterclaim shall not be allow^ed 
in favor of any debtor of the bankrupt "wrhich (1) is 
not provable against the estate; or (2) was pur- 
chased by or transferred to him after the filing of 
the petition, or within four months before such filing, 
w^ith a view to such use and -with knowledge or 
notice that such bankrupt was insolvent, or had 
committed an act of bankruptcy. 

Set- Off of Mutual Debts. 

"This section was not intended to enlarge the doctrine of 
set-off, or to enable a party to make a set-off in cases where 



244 ESTATES. (Ch. 7 

the principles of legal or equitable set-off did not previously 
authorize it. The debts must be mutual, — must be in the- 
same right." Miller, J., in Sawyer v. Hoag, 17 Wall. 622. 
But the term "mutual credits" in the bankrupt act is more 
comprehensive than the term "mutual debts" in the statutes 
relating to set-off. The term "credit" is synonymous with 
"trust," and the trust or credit need not be of money on both 
sides. Where a creditor has goods or choses in action of the 
bankrupt put in his hands before the bankruptcy, by a valid 
contract, by the terms of which the deposit will result in a 
debt, as if they are deposited for sale or collection, the case 
of mutual credits has arisen within the meaning of the act. 
Murray v. Eiggs, 15 Johns. 571; Ex parte Caylus, 1 Low. 550, 
Fed. Cas. No. 2,534; Marks v. Barker, 1 Wash. C. 0. 178, Fed. 
Cas. No. 9,096; Tucker v. Oxley, 5 Cranch, 34. Thus a 
creditor who holds goods or chattels at the time of bank- 
ruptcy, belonging to the bankrupt, with power of sale, or 
choses in action with power of collection, may sell the goods 
or collect the claims, and set them off against the debt the 
bankrupt owes him. In re Dow (Ex parte Whiting) 14 N. B. 
E. 307, Fed. Cas. No. 17,573. A banker who has for collec- 
tion drafts of the bankrupt, the proceeds of which come into 
his hands after bankruptcy, may retain them by virtue of his 
lien. In re Farnsworth, 14 N. B. E. 148, Fed. Cas. No. 4,673. 
And the*words "mutual credits" are broad enough to include 
an indorser on a bill which was protested before the com- 
mencement of the proceedings in bankruptcy, although he 
did not pay it until afterwards. Marks v. Barker, 1 Wash. 
C. C. 178, Fed. Cas. No. 9,096. When there is a debt due on 
one side, and on the other a delivery of property with direc- 
tions to turn it into money, the property thus delivered consti- 
tutes a credit, and the case becomes one of mutual credits 
under the baidirupt laws. Goodrich v. Dobson, 43 Conn. 576. 
So also the discharge in bankruptcy of one of two joint judg- 
ment-debtors transforms the debt in equity into a several one 



§ 68) SKT-OPFS AND COUNTERCI.AIMS. 245 

against the other, so that the trustee may make it a set-off 
against a judgment held by the other against him, and thus 
obtain satisfaction of the latter judgment. Cosgrove v. Cos- 
by, 86 Ind. 511. So where a bailee of an insolvent debtor's 
goods, prior to the filing of a petition in bankruptcy against 
such debtor, employed him to assist in the sale and manage- 
ment of the goods, it was held that such employment was not 
illegal, and that the bailee, as against the trustee in bank- 
ruptcy, was entitled to a credit for the amount paid therefor. 
Catlin V. Foster. 1 Sawy. 37, Fed. Cas. No. 2,519. Again, a 
claim for loss under an insurance policy may be set off by the 
insured against his indebtedness to the company. Drake v. 
Kollo, 3 Biss. 273, Fed. Cas. No. 4,066. But where a claim 
against a bankrupt insurance company, for loss under its 
policies, has been assigned, after notice of insolvency, the 
assignee cannot set it off against his previous indebtedness 
to the company; the debts and credits are not "mutual" in 
such case. Hitchcock v. Hollo, 3 Biss. 276, Fed. Cas. No. 
6,535. Further, trust-debts cannot be made the subject of 
set-off under this section. Thus, where the trustee of a 
bankrupt insurance company sues a stockholder for the un- 
paid balance of his subscription to its capital, the latter can- 
not set off a claim against the company for a loss under its 
policy, for the unpaid stock subscriptions are in reality a 
trust-fund for the creditors of the company, and therefore the 
debts are not mutual, and to allow such a set-off would en- 
able the stockholder to turn his fiduciary relation to his own 
benefit and the detriment of the creditors. Scammon v. Kam- 
ball, Biss. 431, Fed. Cas. No. 12,435. So also, money trans- 
mitted by the bankrupt to a creditor with directions as to 
the manner in which it is to be applied, is received under a 
trust to apply it according to instructions; and if the creditor 
refuses to so use it, and the trustee sues him for the amount, 
he cannot offer in set-off his claim against the bankrupt's es- 
tate. Libby v. Hopkins, 104 U. S. 303. One who holds the 



246 KSTATKs. CCh. 7 

bare legal title to a note given by a debtor cannot set off 
against it, in banliruptcy, a debt which he owes the bank- 
rupt for goods bought. In re Lane, 2 Low. 305, Fed. Cas. No. 
8,043. A joint indebtedness may be proved and set off 
against the estate of either of the joint debtors who may be- 
come bankrupt, and it is immaterial that it may be subject 
to be marshalled, for the joint debtors are severally liable in 
solido for the whole debt. Gray v. Eollo, 18 Wall. 629. See, 
also. In re Carrier, 39 Fed. 193. In one of the cases it ap- 
peared that V. and B. were partners in the live-stock business, 
and V. was adjudged a bankrupt. At the time of his adjudi- 
cation he was indebted to B. upon transactions not connected 
with the partnership. Upon the settlement of the partner- 
ship accounts there was a balance thereon due from B. to V. 
It was held that B. had a right to set off against the amount 
due from him to the bankrupt on the partnership transactions 
the independent debts due from the bankrupt to himself. In 
re Voetter, 4 Fed. 632. But a judgment obtained by a trustee 
in bankruptcy, for a penalty incurred by the violation of a 
state statute against usury, cannot be set off against a claim 
of the judgment-debtor against the bankrupt estate. Wilson 
V. National Bank, 1 McCrary, 538, 3 Fed. 391. A creditor of a 
bankrupt cannot obtain a preference of his debt by purchas- 
ing the property of the bankrupt through the intervention 
of an agent, and tendering the notes of the bankrupt in pay- 
ment for the same. And in an action by the assignee to re- 
cover the value of such property, the creditor cannot set off 
the notes of the bankrupt. Fleming v. Andrews, 3 Fed. 
632. 

Claims Purchased with a Vieio to Set- Off. 

A claim against the bankrupt purchased before the filing 
of the petition, but with full knowledge of the insolvency, 
and with intent to use the claim as a set-off, was held avail- 
able for that purpose in a case of voluntary bankruptcy 



§ 68) SET-OFFS AND COUKTERCI.AIMS. 247 

under the act of 1807. Lloyd v. Turner, 5 Sawy. 463, Fed. 
Cas. No. 8,436. But it is to be observed that the present 
act makes no distinction, in this respect, between voluntai'y 
and compulsory cases. "The debtor of a bankrupt cannot 
set off against the assignee of the bankrupt a claim ob- 
tained while proceedings in bankruptcy are pending; such 
a case being similar in principle to that of the debtor of 
an intestate seeking to set off a debt due from the intestate 
purchased by the defendant after the death of the intes- 
tate." Wat. Set-Off, § 200; Smith v. Brinckerhoff, 8 Barb. 
519. A consent to an assignment of an open account given 
after the commission of the act of bankruptcy, but before 
the filing of a petition against the debtor, does not confer 
any higher or better rights upon the assignee. Eollins v. 
T^itchell, 14 N. B. E. 201, Fed. Cas. No. 12,027. But it is 
not unlawful for the creditor of an insolvent to sell his debt 
to "the debtor of such insolvent, although it be purchased 
for the purpose of being used in set-ofE. "The defendants 
Avere free to sell their notes to any one who would buy them, 
whether that purchaser could or could not use them in set- 
off. If he could so use them, there was no wrong done; if 
he could not, there was no injury." Mattocks v. Lovering, 
3 Fed. 212. 

Claim, already proved cannot he "used as Set- Off. 

Proving his claim in the bankruptcy proceedings is a 
waiver by the creditor of all right of action or suit against 
the bankrupt in respect of such claim. Hence, where the 
creditor proved his claim, but omitted to credit the bank- 
rupt with a debt due to him from the creditor, and the trus- 
tee sued for such debt, it was held that the creditor could 
not offer the claim already proved, by way of set-off to that 
suit. His doing so would be equivalent to the prosecution 
of an original suit for its amount, the right to which he had 
waived. Brown v. Farmers' Bank, 6 Bush, 198; Kussell v. 
Owen, 61 Mo. 185. 



248 ESTATES. CCh. 7 

POSSESSION OF PROPERTY. 

§ 69. a A. judge may, upon satisfactory proof, 
by aflO-davit, that a bankrupt against -whoni an in- 
voluntary petition has been filed and is pending 
has committed an act of bankruptcy, or has neg- 
lected or is neglecting, or is about to so neglect his 
property that it has thereby deteriorated or is there- 
by deteriorating or is aboub thereby to deteriorate 
in value, issue a Tvarrant to the marshal to seize 
and hold it subject to further orders. Before such 
■vrarrant is issued the petitioners applying therefor 
shall enter into a bond in such an araount as the 
judge shall fix, -with such sureties as he shall ap- 
prove, conditioned to indemnify such bankrupt for 
such damages as he shall sustain in the event such 
seizure shall prove to have been -wrrongfuUy ob- 
tained. Such property shall be released, if such 
bankrupt shall give bond in a sum -which shall be 
fl.xed by the judge, vsrith such sureties as he shall 
approve, conditioned to turn over such property, 
or pay the value thereof in money to the trustee, 
in the event he is adjudged a bankrupt pursuant 
to such petition. 

Seizure of Property. 

When the marshal receives the warrant provided for in this 
section, it is his duty to take, possession of all the bankrupt's 
property in whosesoever hands he may find it. Yet if he 
takes property from a third person, his warrant will protect 
him only so far as the goods belong to the bankrupt. If he 
wrongfully seizes the effects of a stranger, the act is as much 
a trespass as if committed by a private individual. Marsh 
V. Armstrong, 20 Minn. 81. But if he seizes property which 



§ 70) TITLE TO PROPKRTY. 249 

has been transferred in violation of the bankruptrv law, he 
is not liable to the transferee. Stevenson v. McLaren, 3 
Cent. Law J. 478. 

TITLE TO PROPERTY. 

§ 70. a The trustee of the estate of a bankrupt, 
upon his appointment and qualification, and his 
successor or successors, if he shall have one or 
more, upon his or their appointment and qualifica- 
tion, shall in turn be vested by operation of law 
•with the title of the bankrupt, as of the date he 
w^as adjudged a bankrupt, except in so far as it is 
to property which is exempt, to all (1) documents 
relating to his property; (2) interests in patents, 
patent rights, copyrights, and trade-marks; (3) 
pow^ers -which he might have exercised for his ow^n 
benefit, but not those which he might have exer- 
cised for some other person; (4) property trans- 
ferred by him in fraud of his creditors; (5) prop- 
erty w^hich prior to the filing of the petition he 
could by any means have transferred or which 
might have been levied upon and sold under judi- 
cial process against him: provided, that when any 
bankrupt shall have any insurance policy which 
has a cash surrender value payable to himself, his 
estate or personal representatives, he may, w^ithin 
thirty days after the cash surrender value has been 
ascertained and stated to the trustee by the com- 
pany issuing the same, pay or secure to the trus- 
tee the sum so ascertained and stated, and continue 
to hold, own, and carry such policy free from the 
claims of the creditors participating in the distribu- 



250 ESTATES. (Ch. 7 

tion of his estate under the bankruptcy proceed- 
ings, otherwise the policy shall pass to the trustee 
as assets ; and (6) rights of action arising upon 
contracts or from the unlawful taking or detention 
of, or injury to, his property. 

b All real and personal property belonging to 
bankrupt estates shall be appraised by three dis- 
interested appraisers ; they shall be appointed by, 
and report to, the court. Real and personal prop- 
erty shall, when practicable, be sold subject to the 
approval of the court ; it shall not be sold other- 
■wise than subject to the approval of the court for 
less than seventy-five per centum of its appraised 
value. 

c The title to property of a bankrupt estate which 
has been sold, as herein provided, shall be con- 
veyed to the purchaser by the trustee. 

d Whenever a composition shall be set aside, or 
discharge revoked, the trustee shall, upon his ap- 
pointment and qualification, be vested as herein 
provided with the title to all of the property of the 
bankrupt as of the date of the final decree setting 
aside the composition or revoking the discharge. 

e The trustee may avoid any transfer by the 
bankrupt of his property which any creditor of 
such bankrupt might have avoided, and may re- 
cover the property so transferred, or its value, 
from the person to whom it was transferred, un- 
less he w^as a bona fide holder for value prior to 
the date of the adjudication. Such property may 
be recovered or its value collected from whoever 
may have received it, except a bona fide holder for 
value. 



§ 70) TITLE TO PROPERTY. 251 

/ Upon the couflrmation of a composition offered 
by a bankrupt, the title to his property shall there- 
upon revest in him. 

Nature wnd Origin of Trustee's Title. 

The trustee's title relates back to the date of the adjudi- 
cation and accrues as of that date. Conner v. Long, 104 
U. S. 228; Zeiber v. Hill, 1 Sawy. 268, Fed. Cas. No. 18,206. 
Hence it seems that a debtor of the bankrupt who makes 
payment to the latter, after the institution of the bank- 
ruptcy proceedings but before adjudication, and without ac- 
tual notice or knowledge of the pendency of such proceedings, 
and in the usual course of business, will be protected 
against a subsequent action by the trustee in respect of the 
same debt. See Howard v. Crompton, 14 Blatchf. 328, Fed. 
Cas. Ko. 6,758. 

Whom the Trustee Represents. 

A trustee in bankruptcy, besides being an offlcer of the 
court which appoints him, is the representative of the cred- 
itors of the estate, and is therefore invested with certain 
powers and privileges which could not have been exercised 
by the bankrupt himself. Thus, under the bankrupt act, 
mortgages of realty and chattel mortgages and bills of sale 
of personalty which, though valid and binding as between 
mortgagor and mortgagee, are void as to creditors under 
the local law, for want of record or otherwise, are void as 
to the trustee. Edmondson v. Hyde, 2 Sawy. 205, Fed. Cas. 
No. 4,285; In re Morrill, 2 Sawy. 357, Fed. Cas. No. 9,821; 
Moore v. Young, 4 Biss. 128, Fed. Cas. No. 9,782. He has all 
the rights in this respect that would belong to an attaching or 
execution creditor if bankruptcy had not supervened. In 
re Werner, 5 Dill. 119, Fed. Cas. No. 17,416. He may also 
enquire into the lawfulness of all judgments standing 



252 ESTATES. (Ch. 7 

against the bankrupt, because he represents creditors, and 
therefore is not in privity with the debtor so far as to be 
prohibited from collateral attacks on judgments against 
him. Partridge v. Dearborn, 2 Low. 286, Fed. Cas. No. 
10,785. At the same time it must be remembered that the 
trustee also represents the hanhrupt, at least in so far as 
may be necessary to sustain the rule that he takes no great- 
er interest or estate than the bankrupt himself possessed, 
and that he takes subject to all lawful incumbrances. Thus, 
where the trustee brings his bill to set aside a sale of the 
bankrupt's realty, made under a deed of trust, and for leave 
to redeem, he has no greater rights than the bankrupt would 
have under the circumstances, and any defense that would 
be available against the bankrupt may be urged against the 
trustee. Jenkins v. Pierce, 98 111. 646. The trustee repre- 
sents the bankrupt and his estate in every district and every 
state and collects the assets wherever found. Cannon v. 
Wellford, 22 Grat. 195. The bankrupt is, in a certain sense 
of the term, civiliter mortuus during the proceedings. Yet 
the individual bankruptcy of a person, who is a stockholder 
in, and a director and officer of, a corporation which is not 
in bankruptcy, does not incapacitate him from exercising his 
functions as such officer of the corporation, nor render in- 
oi)erative and void as to third parties the acts and convey- 
ances of the corporation done and executed through him as 
its representative. Atlas Nat. Bank v. F. B. Gardner Co., 
8 Biss. 537, Fed. Cas. No. 635. If the trustee himself is ad- 
judged bankrupt, neither his trustees nor his personal rep- 
resentatives are entitled to debts due to the original bank- 
rupt; they must go to a new trustee of the original bank- 
rupt. Merrick's Estate, 5 Watts & S. 9. But it seems that 
upon the death of an assignee in bankruptcy the right of ac- 
tion for a debt due the bankrupt vests in the executor of the 
assignee. Eichards v. Insurance Co., 8 Cranch, 84. Trus- 



§ 70) TITLE TO PROPERTY. 253 

tees in bankruptcy do not succeed to the rights of assignees 
in insolvency whose assignment they have had set aside. 
Alexander v. Gait, 9 Fed. 149. 

Bankrwpfs Rights iefore Appovntment of Trustee. 

The bankrupt has charge of his own property, during the 
time between the petition and the appointment of the as- 
signee, as a sort of trustee. Hence where the court orders 
the marshal to sell a part of the goods, as perishable, the 
bankrupt cannot become the purchaser. March v. Heaton, 
1 Low. 278, Fed. Cas. No. 9,061. And during this interval, 
the bankrupt has the right to pursue all proper legal meas- 
ures for the protection of his interests. Myers v. Calla- 
ghan, 10 Biss. 139, 5 Fed. 726. In other words, prior to the 
vesting of title in a trustee, the title to the debtor's real and 
personal property remains unchanged, except that the court, 
in certain cases, may in the meantime issue its injunction to 
restrain the bankrupt or any other person from transfer- 
ring or disposing of any part of the same, not excepted 
from the operation of the act. Hampton v. Eouse, 22 Wall. 
263. 

What Vests in Tnistee; Assets Defined. 

Assets in bankruptcy are the proceeds of the bankrupt's 
property which come into the hands of the assignee and arc 
applicable to the payment of his debts. In re Wilson, 2 
Hughes, 228, Fed. Cas. No. 17,782. 

Property in Bankrupt's Possession. 

All property of a bankrupt in his actual possession at the 
time of the filing of the petition passes into the hands of the 
trustee the instant he is appointed. In re Vogel, 7 Blatchf. 
18, Fed. Cas. No. 16,982. And where a deficit is shown in the 
assets of the bankrupt's estate, he must account for it by a sat- 
isfactory explanation, or pay the amount of the deficit to the 
trustee. In re Peltasohn, 4 Dill. 107, Fed. Cas. No. 10,912. 



254 ESTATES. (Ch. 7 

But the circumstance that property which belonged to a third 
party had become subject to the control of the bankruptcy 
court by reason of the fact that it was in the possession of the 
bankrupt, and therefore passed into the possession of the trus- 
tee, presents no obstacle to the actual owner's regaining posses- 
sion of his property. He may have it on petition and proof to 
the court. In re Havens, 8 Ben. 309, Fed. Gas. No. 6,230. 
"Whatever money or property is in the possession of the bank- 
rupt at the time of filing his petition, which he is actually 
using and holding as his own, passes to his assignee in bank- 
ruptcy, and he cannot set up in defense to the claim of the 
assignee a title in a third person, merely for the purpose of 
holding on to it himself. If third persons have the posses- 
sion, this court cannot, on summary petition, order it to be de- 
livered to the assignee. But if the bankrupt has it, it passes 
to the assignee, subject to the liens or rights of third persons, 
whatever they may be. After the assignee gets the property, 
any third person may, by petition or suit, assert his rights in 
it." In re Moses, 1 Fed. 845. 

Interests in Real Estate. 

The equity of redemption in property mortgaged by the bank- 
rupt passes to the trustee and vests in him; and neither the 
bankrupt nor any court other than the bankruptcy court can 
affect the title of the trustee by proceedings to which he is 
not a party. Barron v. Newberry, 1 Biss. 149, Fed. Gas. No. 
1,056; Eobinson v. Denny, 57 Ala. 492; 1 Daniell, Gh. Prac. 
*58. Hence a decree of foreclosure against the bankrupt, the 
trustee not having been joined, is insufficient to extinguish 
the equity of redemption. Barron v. Newberry, supra. So a 
vested interest in a contingent remainder passes to the trustee 
m bankruptcy. Putnam v. Story, 132 Mass. 205; Belcher v. 
Burnett, 126 Mass. 230; Gomegys v. A'asse, 1 Pet. 218. And 
where the bankrupt is the owner in fee of a public street in 
a city, subject only to the public easement, the right of the 



§ 70) TITLE TO PROPERTY. 255 

owner therein will pass to his trustee in bankruptcy. Kinzie 
V. Winston, 56 111. 56. But the trustee cannot hold real 
estate against a third person who bases his claim on an earlier 
and unrecorded conveyance made to him by the bankrupt. 
Goss V. Coffin, 66 Me. 432. The title to real estate situated 
in a foreign country does not vest in the trustee, for a statu- 
tory conveyance, such as that directed to be made by the judge 
to the trustee under Rev. St. § 5044, can have no extra-terri- 
torial effect upon real estate. Oakey v. Bennett, 11 How. 
33; Barnett v. Pool, 23 Tex. 517. But now, by section 7 of 
the present act, it is made the duty of the bankrupt to "exe- 
cute to his trustee transfers of all his property in foreign coun- 
tries." An estate by the curtesy initiate is such property as 
will pass. In the case In re McKenna, 9 Fed. 27, it appeared 
that the state statute provided that the interest of a husband 
in the real estate of his wife should not, during her life, be 
sold or disposed of by virtue of any judgment, decree, or 
execution against him, nor should the husband and wife be 
ejected or dispossessed of the real estate of the wife by virtue 
of any such judgment, sentence, or decree, nor should the hus- 
band sell his wife's real estate during her life without her join- 
ing in the conveyance in the manner prescribed by law in 
which married women shall convey lands. The wife was 
seised of lands when the husband became bankrupt, there be- 
ing issue of the marriage. It was held that the tenancy by 
the curtesy initiate passed to the trustee in bankruptcy, sub- 
ject to the statutory right of the husband and wife to continue 
to hold the land during her life. And it was also held that this 
state statute and the bankruptcy act did not exempt from the 
operation of the bankruptcy the whole tenancy by the curtesy 
for the life of the husband, but only so much as was measured 
by the life of the wife, and that on her death, pending the 
bankruptcy proceedings, the assignee was entitled to take the 
land for the remainder of the husband's life. 



256 ESTATES. (Ch. 7 

Franchises and Licenses. 

A franchise in the bankrupt consisting of the right to take 
tolls for crossing at a bridge or causeway is a species of prop- 
erty which will pass to the trustee. Stewart v. Hargrove, 23 
Ala. 429. But it is held that a franchise to construct a turn- 
pike road and take tolls, is a personal trust, not assignable 
without the consent of the granting power, and therefore will 
not pass to the trustee of the holder. People v. Duncan, 41 
Cal. 507. But in another case it was held that a license to 
occupy a particular stall in a city market, for which a weekly 
rental was paid, which license was revocable at the pleasure 
of the city authorities and could not be assigned to another 
person without written permission, but which had an ascer- 
tainable market value as an article of sale, and could, in point 
of fact, be transferred without any practical difficulty, was 
assets in the hands of the trustee, and that the court should 
order the bankrupt to execute a transfer of the license to the 
trustee and a. request to the city officer to assent to the trans- 
fer, so that the trustee might realize the sale value of the 
license for the benefit of the estate. In re Gallagher, 16 
Blatchf. 410, Fed. Cas. No. 5,192. 

Membership in Exchange. 

It was held in one case that a certificate of membership in 
a board of trade, although it may have a market value, is not 
assets in the hands of the trustee in bankruptcy. In re Suther- 
land, 6 Biss. 526, Fed. Cas. No. 13,637. But on the other hand, 
a later authority rules that a membership in the New York 
Produce Exchange is property which passes to the trustee. 
As remarked by Nixon, D. J., "The bankrupt, before his bank- 
ruptcy, had the power of selling and assigning his certificate 
of membership to any one who was willing to purchase the 
same and take the risk of an election by the board of man- 
agers. It had and has a market value, the statement being 
made on the argument, without contradiction, that it would 



§ 70) TITLE TO PROPERTY. 257 

bring seTeral thousand dollars. Under the circumstances I 
have no difficulty, on principle, in holding that membership 
in such an exchange is property which the creditors of a 
bankrupt are entitled to have applied to the payment of their 
debts." In re Warder, 10 Fed. 275. See also Hyde v. Woods, 
94 U. S. 523; In re Gallagher, 16 Blatchf. 410, Fed. Gas. No. 
5,192. 

Trade-Marks. 

Under the former bankrupt law, it was held that a trade- 
mark, consisting of a man's individual name prefixed to the' 
title of the article he manufactures, was not property which 
would vest in the trustee in bankruptcv. Helmbold v. Helm- 
bold Mfg. Co., 53 How. Prac. 453. But the present act ex- 
pressly classes such interests with the estate which the trustee 
takes. But where, one sells his distillery, and agrees that dur- 
ing a short period, in which he does not propose to engage ia 
business, the purchasers may use his name in branding 
whisky, there is no such suspension of the use on his part as 
will cause him to lose his right to use it thereafter; nor does 
such right to so use his name pass to his trustee in bank- 
ruptcy. Mattingly v. Stone (Ky.) 14 S. W. 47. 

Chases in Action. 

Where the bankrupt and certain other parties made a con- 
tract by which a speculation in real estate was arranged, the 
bankrupt to have a designated interest and a share of the 
profits, it was held that he had such an interest in the assets 
which grew out of the real estate operations as would pass 
to his trustee. Sherman v. International Bank, 8 Biss. 371, 
Fed. Cas. No. 12,765. Where the bankrupt is the beneficiary 
in a policy of life insurance, the premiums on which are all 
paid by the assured without his aid or interference, he has 
no such interest in the policy or its possible fruits, during the 
life of the assured, as will vest in his trustee in bankruptcy. 
BL. BANK.— 17 



258 ESTATES. (Ch. 7 

In re Murrin, 2 Dill. 120, Fed. Cas. No. 9,968, though see 
Brigham v. Home Ins. Co., 131 Mass. 319. A motion against 
a sheriff for failing to make money on an execution which 
had issued in favor of a plaintiff who, after the rendition of 
the judgment, had been declared a bankrupt, must be made 
in the name of the trustee in bankruptcy. Gary v. Bates, 12 
Ala. 544. The trustee in bankruptcy will not take his wife's 
choses in action (e. g., a legacy then vested in her but not 
then payable), for the husband has but a power to reduce 
them to possession. Shay v. Sessaman, 10 Pa. St. 432. 
Judgments owned by the bankrupt pass to and vest in the 
assignee. Hale v. Christy, 24 Neb. 746, 40 N. W. 295. And 
a claim against the United States for goods seized and de- 
stroyed during the war constitutes property and will pass to 
the trustee in bankruptcy, although from lapse of time, it 
cannot be judicially enforced. Erwin v. U. S., 97 U. S. 392; 
Phelps V. McDonald, 99 U. S. 298. But it is otherwise as to 
claims against the government which are inchoate and im- 
perfect at the time, and are afterwards made available only 
by an act of grace on the part of the government. Thus, in 
1863, the plaintiff paid war premiums on certain vessels in- 
sured against capture by Confederate cruisers. In 1868 he 
was adjudicated a bankrupt, and defendant was appointed 
his assignee. Under the act of congress of 1882, by which 
the court of commissioners of Alabama claims was re-estab- 
lished, he applied for re-imbursement for the premiums so 
paid. Subsequently, under a rule of that court, defendant 
Ijecame a party to that proceeding, prosecuted it to final judg- 
ment, and received the proceeds thereof. It was held that, 
at the time of plaintiff's bankruptcy, this claim, not being 
xin existing right to any property, did not pass to the as- 
signee in bankruptcy. As the payment of enhanced war 
premiums by the government was a voluntary act, and the 
act allowing such payment was passed after plaintiff's bank- 
juptcy, his rights under such act do not relate back and car- 



§ 70) TITLE TO PROPERTY. 259 

ry the claim to the assignee. Kingsbury v. Mattocks, 81 
Me. 310, 17 Atl. 126. See, also. Heard v. Sturgis, 146 Mass. 
545, 16 N. E. 437; Brooks v. Ahrens, 68 Md. 212, 12 Atl. 19. 

Actions for Torts and Penalties. 

The general rule is, that the right of action for injuries to 
the bankrupt's person, reputation, or estate (except in the 
cases mentioned in the act) will not pass to his trustee. See 
Dicey, Parties, 399 et seq. Thus, a right of action for slan- 
der of the bankrupt will not pass, and hence a plea, in sucli 
suit, that the plaintiff, since its commencement, has been ad- 
judged a bankrupt, is not good. Dillard v. Collins, 25 Grat. 
343. But in a case where the bankrupt had been induced by 
the fraudulent misrepresentations of another person to en- 
ter into partnership with him, contributing a large sum to 
the capital of the concern, which money was wholly lost to 
him in consequence of the deceit and fraud which had been 
practiced upon him, it was held that the right of action for 
this deceit passed to the trustee. Hyde t. Tuffts, 45 N. Y. 
Super. Ct. 56. The right of action against a national bank, 
tn recover twice the amount of usurious interest paid, under 
Pev. St. § 5198, will pass to and vest in the trustee in bank- 
luptcy of the borrower. Monongahela Bank v. Overholt, 96 
Pa. St. 327; Crocker v. Bank, 3 Cent. Law J. 527; Id., 4 
Dill. 358, Fed. Cas. No. 3,397; Wright v. Bank, 18 N. B. R. 
87, Fed. Cas. No. 18,078; Moore v. Jones, 23 Vt. 739; per 
contra, Bromley v. Smith, 5 N. B. E. 152, Fed. Cas. No. 1,922. 
The right to sue for money lost in gaming, given by statute 
to the loser, is a vested interest and will pass to his trustee in 
bankruptcy. Brandon v. Sands, 2 Ves. Jr. 514. 

Property vn the Hands of Recewers and Assignees. 

Where an action is commenced in a state court for the 
dissolution of a partnership and the settlement of its affairs, 
and a receiver is appointed by the court, who takes posses- 



260 ESTATES. (Ch. 7 

Bion of the property and effects of the firm, and subsequently 
bankruptcy proceedings are begun against the firm, and an 
adjudication is made and a trustee appointed, there is noth- 
ing in the bankrupt law which gives the trustee power to 
take any property out of the receiver's possession, nor is 
there any provision which, in terms or by implication, con- 
fers upon the bankruptcy court a power to interfere in the 
trustee's behalf in respect of such property; the property 
must be fully administered by the state court, but the trus- 
tee may conduct the action and make all necessary applica- 
tions to the court. Clark v. Binninger, 39 How. Prac. 363; 
In re Clark, 4 Ben. 88, Fed. Cas. No. 2,798, though see In re 
Whipple, 6 Biss. 516, Fed. Cas. No. 17,512. But a valid ad- 
judication of bankruptcy against a debtor has the effect to 
subject him and his property to the operation of the bank- 
rupt act notwithstanding a previous voluntary general as- 
signment for the benefit of creditors ; and the trustee in bank- 
ruptcy, as against the assignee under the state law, is enti- 
tled to the possession and control of the estate. Hobson v. 
Markson, 1 Dill. 421, Fed. Cas. No. 6,555; Ostrander v. 
Meunch, 2 McCrary, 267, 12 Fed. 562. Under the act of 1867 
(Kev. St. § 5044), only attachments levied within a certain 
time were dissolved by the bankruptcy proceedings; and 
hence it was held that property in the hands of a sheriff un- 
der execution from a state court levied before the proceed- 
ings in bankruptcy were commenced could not be taken out 
of his possession by the federal court. Townsend v. Leon- 
ard, 3 Dill. 370, Fed. Cas. No. 14,117; Johnson v. Bishop, 1 
Woolw. 324, Fed. Cas. No. 7,373; Marshall v. Knox, 16 Wall. 
551 ; though this was doubted in Ee Schnepf , 2 Ben. 72, Fed. 
Cas. No. 12,471. But it will be noticed that the words of the 
present statute, in relation to the dissolution of liens by an 
adjudication in bankruptcy, would fully cover the case here 
supposed. 



§ 70) TITLE TO PEOPERTY. 26 1 

Property Held Try Bankrupt in Trust. 

Upon an adjudication in bankruptcy, the debts due a trus- 
tee so adjudged, if any, on account of his trust, and his prop- 
erty rights in lands held by him in trust, pass to his assignee, 
but his duties as trustee remain unaffected by the proceed- 
ing. If any claims in favor of the trustee vest in his as- 
signee which are prior liens upon the trust-lands, it is the 
duty of the trustee to pay them off. Rankin v. Barcroft, 114 
111. 441, 3 N. E. 97. The general rule upon this subject has 
been well stated in the following language: "Money deliv- 
ered to the bankrupt in trust, if ear-marked or separately 
kept and retained as trust property to be delivered or paid 
over in the same bills or coin in which it was received by 
the bankrupt, would not pass under such assignment, but 
would be considered as trust property; but an amount of 
money due from the bankrupt as trustee, and which could 
not be distinguished from any moneys in his possession or 
under his control, or which was only due from him because 
he had used trust funds for his own purposes, or otherwise 
misapplied them, could not be considered as property held 
by the bankrupt in trust." Hosmer v. Jewett, 6 Ben. 208, 
Fed. Cas. No. 6,713. The relation between a bank and its 
customers is that of simple debtor and creditor, not princi- 
pal and agent, and does not partake of a fiduciary character, 
and moneys on deposit go to the trustee of the bank. In re 
Bank of Madison, 5 Biss. 515, Fed. Cas. No. 890; Phelan v. 
Iron Mountain Bank, 4 Dill. 88, Fed. Cas. No. 11,069. Sim- 
ilarly, a consignor whose property was sold prior to the bank- 
ruptcy, and the proceeds mingled with the general assets, has 
no lien or specific claim against the estate, because the pro- 
ceeds of such sale, being no longer held in specie nor dis- 
tinguishable from the general fund, cannot be regarded as 
held by the bankrupt in trust. In re Coan & Ten Broeke 
Mfg. Co., 6 Biss. 315, Fed. Cas. No. 2,913. But the assets of 
a firm in the possession of one of the partners are held in 



262 ESTATES. (Ch. 7 

trust for the creditors of the firm, and if the partner in pos- 
session of them is afterwards adjudged a bankrupt, they do 
not go to his trustee. Jones v. Newsom, 7 Biss. 321, Fed. 
Cas. No. 7,484. Where a merchant is induced by the fraud- 
ulent representations of a member of a firm to sell goods on 
credit to the firm, and the goods do not lose their identity 
nor cease to be distinguishable, he may rescind the contract 
of sale and follow the goods wherever he can find them; and 
if, under these circumstances, the firm consents to return the 
uilsold portion of the goods and account for the rest, this ar- 
rangement is binding on it, notwithstanding its supervening 
bankruptcy, and the trustee cannot recover the goods from 
the merchant again, nor their proceeds. Montgomery v. 
Bucyrus Machine Works, 92 U. S. 257; Donaldson v. Far- 
well, 93 U. S. 631. 

Beneficial Interest in Trust Estate. 

Where land is devised to trustees to be held, with its ac- 
cumulations, until the beneficiary reaches a certain age, and 
before that time he is adjudged bankrupt, his interest in the 
estate will go to the trustee in bankruptcy. Sanford v. 
Lackland, 2 Dill. 6, Fed. Cas. No. 12,312. See, also. Smith v. 
Profltt, 82 Va. 832, 1 S. E. 67. But where a will devised 
certain property to trustees, in trust to pay the net rents and 
profits to the beneficiary in person, and it was further pro- 
vided that the beneficiary should have no power to incumber 
the estate or anticipate the rents, and that the property 
should descend to the heirs of the beneficiary, it was held 
that no interest or estate in such property, or the rents and 
profits thereof, passed to the trustee in bankruptcy of the 
beneficiary, but the trustee under the will should continue 
to make payments to such beneficiary in person. Spindle v. 
Shreve, 9 Biss. 199, 4 Fed. 136. "No case is cited, none is 
known to us, which goes so far as to hold that an absolute 
discretion in the trustee [under a will]— a discretion which, 



§ 70) TITLE TO PROFKRTY. 263 

by the express language of the will, he is under no obligation 
to exercise in favor of the bankrupt — confers such an inter- 
est on the latter, that he or his assignee in bankruptcy can 
successfully assert it in a court of equity or any other court." 
Nichols V. Eaton, 91 U. S. 716. 

After A.cquired Property. 

The earnings and acquisitions of the bankrupt, after the 
commencement of the proceedings against him, are his own, 
subject to the condition that they shall remain liable for his 
debts if he does not succeed in obtaining a discharge. Mays 
T. Bank, 64 Pa. St. 74; Day t. Superior Court, 61 Gal. 489, 
Thus where an estate was conveyed to a husband and wife to 
be held in entirety, and the husband went into bankruptcy, 
and between the adjudication and his discharge he obtained 
a divorce, it was held that when the adjudication was made 
he had no interest in the real estate which could pass to the 
trustee, and if he gained an alienable interest by the divorce, 
it was a new acquisition which could not be claimed by the 
trustee in bankruptcy. In re Benson, 8 Biss. 116, Fed. Cas. 
No. 1,328. 

Executory Contracts. 

By the terms of the act the trustee succeeds to the bank- 
rupt's interest in "rights of action arising upon contracts." 
Whatever those rights are, the trustee can claim and enforce 
them. It is not the purpose of the bankrupt law. to inter- 
fere with or avoid contracts made by the bankrupt with oth- 
er parties or prevent their execution. Foster v. Hackley, 2 
N. B. R. 40'6, Fed. Cas. No. 4,971. But executory contracts 
in which the personal skill or conduct of the bankrupt forms 
a material part do not in general pass to the trustee. Dicey, 
Parties, 195; 3 Pars. Cont. 479; Leake, Cont. 1273; Gibson 
V. Carruthers, 8 Mees. & W. 333. Contracts of the bankrupt 
which are to continue for a fixed period, which will probably 



264 ESTATES. (Ch. 7 

outlive the bankruptcy proceedings, and which depend upon 
the future personal services of the bankrupt, are not such 
property as will pass to the trustee. Streeter v. Sumner, 31 
N. H. 542. Where it appeared, from the facts of the case, 
that the consideration for an agreement to pay money to the 
bankrupt was not for any interest in property, real or per- 
sonal, existing at the time of his adjudication, but simply "to 
buy peace" with reference to certain pretended claims assert- 
ed by the bankrupt, it was held that the trustee had no right 
or title to such agreement. Cullen v. Dawson, 24 Minn. 66. 

Surdensome Interests. 

A trustee in bankruptcy is not bound to take into his pos- 
session property which may be onerous to the estate, or a 
burden instead of a benefit to it ; and if he does not take it, 
it remains in the bankrupt. Amory v. Lawrence, 3 Cliff. 523, 
Fed. Cas. No. 336; Copeland v. Stephens, 1 Barn. & Aid. 
603; Kimberling v. Hartly, 1 Fed. 571; Glenn v. Howard, 
65 Md. 40, 3 Atl. 895; Nash v. Simpson, 78 Me. 142, 3 Atl. 
53. So if the trustee and the general creditors are satisfied 
that a given debt against the bankrupt is valid, and that the 
property upon which it is secured is of no more value than is 
sufficient to pay it, he may abandon it to the creditor hold- 
ing the lien. Second Nat. Bank of Louisville v. National 
State Bank of New Jersey, 10 Bush, 367. 

Property Revesting in Banlffrwpt. , 

A bankrupt's interest in his estate is not extinguished by 
the assignment in the bankruptcy proceedings to the trus- 
tee in bankruptcy. In respect to real estate, the interest 
remaining in the bankrupt after such assignment is, under 
the statutes of Minnesota, in the nature of a reversion, sub- 
ject to be defeated by a sale of the trustee. King v. Eem- 
ington, 36 Minn. 15, 20 X. W. 352. After the bankruptcy 
proceedings are closed, property of the bankrupt not dis- 



§ 70) TITLE TO PROPERTY. 265, 

posed of by the trustee reverts to the bankrupt. The title 
which Tested in the trustee in bankruptcy cannot be used as 
an outstanding title to defeat the recovery of land so undis- 
posed of when claimed by the heirs of the bankrupt. Hern- 
don v. Davenport, 75 Tex. 462, 12 S. W. 1111. Compare 
Oliver v. Sanborn, 60 Mich. 346, 27 N. W. 527. 

Recovery hy Trustee of Property conveyed in Fraud of Cred- 
itors. 

While property conveyed to the wife in fraud of the hus- 
band's creditors may be pursued by his trustee in bankrupt- 
cy, and subjected to the payment of debts, after it has been 
identified in her hands or in the hands of voluntary grantees 
or purchasers with notice, yet he cannot abandon the pur- 
suit of the property and have a judgment in personam for its 
value against the wife or her executors. Phipps v. Sedgwick, 
95 U. S. 3 ; Trust Co. v. Sedgwick, 97 U. S. 304. The bona flde 
purchaser of negotiable paper, secured by mortgage, before 
maturity and without notice, takes the mortgage, as he 
does the notes, freed from any latent equity existing in a 
trustee in bankruptcy at the time of the assignment of the 
notes, of which latent equity there is no notice actual or 
constructive; Myers v. Hazzard, 4 McCrary, 94, 50 Fed. 155; 
Carpenter v. Longan, 16 Wall. 271 ; and therefore he is enti- 
tled to protection, and to the benefit of his security, as 
against the trustee, although his immediate vendor held un- 
der such circumstances as would have made him liable to 
an action by the trustee to set aside the security. Myers 
V. Hazzard, supra. The trustee can also sue to recover 
land conveyed by the bankrupt, although the conveyance 
was not made within the time limited before the commence- 
ment of bankruptcy proceedings, if the conveyance was 
fraudulent as to creditors at common law. Knowlton v. 
Moseley, 105 Mass. 136; Pratt v. Curtis, 2 Low. 87, Fed. Cas. 
No. 11,375. But if he sues specifically to recover the value 



266 ESTATES. (Ch. 7, § 70 

of property conveyed by the bankrupt to the defendant by 
way of illegal preference under the act, he must recover on 
the case stated in his declaration, and cannot recover on 
the ground that the transfer was void at common law or 
under the statutes of the state. Cragin v. Carmichael, 2 
Dill. 519, Fed. Cas. No. 3,319. 

Trustee's Right of Action Exclusive. 

The right of action in the trustee to recover assets, or 
property which the bankrupt has fraudulently conveyed 
prior to the adjudication, or which he conceals or fails to 
surrender, is exclusive; the creditors cannot maintain such 
a suit, for it is only through his instrumentality that they 
can proceed. Glenny v. Langdon, 98 U. S. 20; Trimble v. 
Woodhead, 102 U. S. 647. Thus a petitioning creditor can- 
not move to set aside an attachment in a state court ; that 
right belongs to the trustee alone. Prichett v. Kelly, 2 
Wkly. Notes Cas. 335. And the negligence of the trustee, 
whereby the action has not been brought within the time 
limited by the act, will not give the creditors a right ta 
maintain the suit in their own names. Moyer v. Dewey, 
103 U. S. 301; Lane v. Mckerson, 99 111. 284; King v. Deitz,. 
12 Pa. St. 156. But see per contra, Bates v. Bradley, 24 
Hun, 84. Where the debtor made a general assignment 
for the benefit of creditors, and afterwards a receiver wa» 
appointed by a state court in an independent proceeding 
against him, and subsequently a trustee in bankruptcy of 
his estate was appointed, it was held that the trustee was- 
the only party who could attack the assignment and re- 
cover the property conveyed under it, and the receiver could 
not do so. Olney v. Tanner, 21 Blatchf. 540, 18 Fed. 636. 
But a bankrupt who purchases a claim from his trustee, 
which was originally due to him. may sue thereon in his own 
name. Udall v. School Dist., 4S Yt. 588. 



Ch. 7) THE TIME WHKN THIS ACT SHALL GO INTO EFFECT. 267 

THE TIME WHEN THIS ACT SHALL GO INTO 
ErFECT. 

a This act shall go into full force and effect upon 
its passage: provided, however, that no petition for vol- 
untary bankruptcy shall be filed within one month 
of the passage thereof, and no petition for in- 
vbluntary bankruptcy shall be filed within four 
months of the passage thereof. 

6 Proceedings commenced under state insolvency 
laws before the passage of this act shall not be af- 
fected by it. 

Approved July 1, 1898. 

Constitutionality of WatioTial Bankruptcy Law. 

By article 1, § 8, of the constitution of the United States, 
congress is invested with power to "establish uniform laws 
on the subject of bankruptcies throughout the United 
States;" and the constitutional validity of the previous fed- 
eral statutes on this subject Jias been fully sustained by the 
courts. The states, indeed, are prohibited by the constitution 
from passing laws impairing the obligation of contracts. But 
since there is nothing in the organic law which forbids con- 
gress to enact statutes which may produce that effect, it is 
universally conceded that a national bankruptcy law, though 
it includes such features, with provisions compulsory upon 
creditors, is valid and constitutional. Black, Const. Law (2d 
Ed.) 211; Evans v. Eaton, Pet. C. C. 322, Fed. Cas. No. 4,- 
559; In re Owens, 12 N. B. E. 518, Fed. Cas. No. 10,632; 
Keene v. Mould, 16 Ohio, 12; Morse v. Hovey, 1 Barb. Oh. 
(N. Y.) 404; In re Beckerford, 1 Dill. 45, Fed. Cas. No. 1,200. 
In fact, the power of congress over the subject of bankruptcy 
is subject to no other restriction than the requirement that 
its laws shall be uniform. It is not to be gauged or limited 
by the British statutes of bankruptcy which were in force 



^68 ESTATES. (Ch. 7 

at the time of the adoption of the constitution. Although by 
those statutes, as then in force, the banliruptcy laws applied 
■only to persons engaged in trade, congress is not obliged to 
limit its laws on the subject of bankruptcy to merchants or 
traders. In re California Pac. K. Co., 3 Sawy. 240, Fed. Gas. 
No. 2,315; Kunzler v. Kohaus, 5 Hill (N. Y.) 317. "The 
power under this clause is sufficiently comprehensive to en- 
able congress to adopt a uniform system of bankruptcy, com- 
mit its administration to such of the courts of the United 
States as it might choose, and to provide the modes of pro- 
■cedure, special or otherwise, as they mi^ht, in their discretion, 
■deem best adapted to secure and accomplish the objects of the 
act; and if such proceedings should differ from those in ordi- 
nary cases and suits, they would, notwithstanding, be obliga- 
tory upon the courts, as congress has, by the constitution, 
plenary authority over that subject." Goodall v. Tuttle, 3 
Biss. 219, Fed. Cas. No. 5,533. The power to create and ad- 
minister a system of bankruptcy is exclusively vested in the 
federal government; congress has not given jurisdiction to 
the state tribunals to carry into effect the bankruptcy law, 
nor would it have power to ve^t such a jurisdiction in those 
courts. McLean v. Lafayette Bank, 3 McLean, 185, Fed. Cas. 
No. 8,885. As to the constitutionality of the penal and crim- 
inal provisions of the bankruptcy act, see the case of U. S. 
V. Fox, 95 U. S. 670, wherein It is said that it is competent for 
congress to enforce, by suitable penalties, all legislation nec- 
essary or proper to the execution of the powers with which it 
is intrusted, and that any act committed with a view of evad- 
ing such legislation, or fraudulently securing its benefits, may 
be made an offense against the United States. 

Constitutionality of Exem/ption Clause. 

The provisions of the bankruptcy law allowing an exemp- 
tion to the extent allowed by the laws of the state in which 
the adjudication is made are not obnoxious to that clause of 



Ch. 7) THE TIME WHEN THIS ACT SHALL GO INTO EFFECT. 269' 

the constitution which gives congress power to establish "uni- 
form" laws on the subject of bankruptcj'. Dozier v. Wilson, 
84 Ga. 301, 10 S. E. 743. A bankruptcy law which, by its 
terms, is made applicable to all the states alike, without dis- 
tinction or discrimination, is not unconstitutional merely be- 
cause its operations may be wholly different in one state from, 
another. Darling v. Berry, 4 MeCrary, 470, 13 Fed. 659. 
In this case it was said: "The circumstances and conditions 
existing in the states of this Union are infinitely various. No 
law which human ingenuity could possibly frame would be^ 
uniform, in the sense of operating equally or alike in the vari- 
ous states, with their different conditions and diversified in- 
terests. « * * Suppose congress should, in a bankruptcy 
law, as it did in 1867, adopt the homestead exemptions pro- 
vided by state laws in force at a specified time; and suppose 
there should in some states be no law giving homestead ex- 
emptions, while in others such exemptions should by law ex- 
ist, — then the operation of the bankruptcy law would not be- 
uniform with respect to the homesteads; but would it be 
for that reason unconstitutional? All that the constitution 
intends is that congress shall not pass partial revenue and 
bankrupt laws. It shall not prescribe one law for this state or- 
section, and a different law for that state or section. The 
law must be general and uniform in its provisions, but its 
working and operation may be very different in different 
states, owing to their diverse conditions and circumstances." 
The system of bankruptcy is, in a relative sense, uniform 
throughout the United States, since the trustee takes in each 
state whatever would have been available to the recourse of 
execution creditors if the bankruptcy law had never been 
passed. Though the states vary in the extent of their exemp- 
tions, yet what remains the bankruptcy law distributes equal- 
ly among the creditors. The law does not in any way vary 
or change the rights of the parties. In re Beckerford, 1 Dill. 
45, Fed. Cas. No. 1,209; In re Jordan, 8 N. B. E. 180, Fed.. 



270 ESTATES. (Ch. 7 

Cas. No. 7,514; In re Appold, 1 N. B. K. 621, Fed. Cas. 
No. 499. 

£anlcrwptcy and TtisoJ/vency Laws Distinguished. 

In connection with the question of the validity of national 
bankruptcy laws and of the insolvency laws of the several 
states, and the effect of the one upon the other, numerous at- 
tempts have been made (but without any marked success) to 
draw a sharp line of distinction between a bankruptcy law, 
properly so called, and an insolvency law. In the case of Ad- 
ams V. Storey, 1 Paine, 79, Fed. Cas. No. 66, will be found a de- 
tailed discussion of the nature of bankruptcy and insolvency 
laws and the differences between them, and the constitutional 
power of the states with reference to the enactment of such 
laws. But in point of fact, as pointed out in Martin v. Berry, 
37 Cal. 208, the only substantial difference between a bank- 
ruptcy law and an insolvency law lies in the circumstance 
that the former affords relief upon the application of the 
creditor, and the latter upon the application of the debtor. 
In the general character of the remedy there is no differ- 
ence, however much the modes in which the remedy may 
be administered may vary. An act which (like the present 
one) embodies provisions for both voluntary and involuntary 
proceedings is in effect both a bankruptcy law and an in- 
solvency law. In matters of detail, however, and even in the 
general theory of the proceeding, there may be wide differ- 
ences between the national bankruptcy law and any particu- 
lar insolvency law in force in a given state. Thus, for ex- 
ample, an assignment in bankruptcy, under the federal law, 
differs from a cession under the insolvency laws of Louisiana 
in that it divests the bankrupt of the title to all his property, 
and transfers the same to the assignee or trustee. May v. 
New Orleans & C. E. Co., 44 La. Ann. 444, 10 South. 769. 
And it should be observed that there is a substantial and im- 
portant difference between the terms "bankrupt" and "in- 



Ch. 7) THE TIME WHEN THIS ACT SHALL GO INTO EFFECT. 271 

solvent," as applied to persons. A person is said to be "bank- 
rupt" when he has done or suffered some act which the law 
declares to be an act of bankruptcy, or when proceedings in 
bankruptcy have been instituted by or against him, or when 
he has been adjudicated a bankrupt. He is "insolvent" when 
he cannot pay his debts as they mature in the ordinary course 
of his business. Thus he may be insolvent without being 
bankrupt. Barr v. Bartram & F. Mfg. Co., 41 Conn. 502. 

Effect of Sankruptcy Law on State Insolvency Laws. 

Insolvency laws may be passed by the states, authorizing 
the discharge of debtors from their obligations and liabili- 
ties on just and reasonable terms. But these laws are sub- 
ject to three important limitations. First, there must be no 
national bankruptcy law in existence at the time, for such a 
law suspends all state laws on the same subject while it con- 
tinues in force. Second, state laws of this kind cannot ap- 
ply to citizens of other states having claims against the debt- 
or, for the state has no jurisdiction over them, unless they 
voluntarily submit their claims to the jurisdiction and agree 
to participate in the distribution of the estate. Third, such 
laws cannot apply to contracts entered into before their 
enactment, for that would impair the obligation of such con- 
tracts. Ogden V. Saunders, 12 Wheat. 213 ; Baldwin v. Hale, 
1 Wall. 223; Gilman v. Lockwood, 4 Wall. 409; Brown v. 
Smart, 145 U. S. 454, 12 Sup. Ct. 958; Hempsted v. Bank, 
78 Wis. 375, 47 N. W. 627; Eoberts v. Atherton, 60 Vt. 563, 
15 Atl. 159. 

The passage of a national bankruptcy law by congress ren- 
ders it supreme. The state laws in force must yield to it, 
and can no longer operate upon persons or cases within the 
purview of the federal statute. The latter does not, indetd, 
repeal or destroy the state laws on the same subject, but it 
suspends their operation. If the state law and the federal 
act operate upon the same subject-matter, upon the saini; 



272 ESTATES. (Ch. 7 

property, upon the same rights, and upon the same persons, 
creditors as well as debtors, or may so operate, they can- 
not go together without direct and positive collision, and in 
such case the federal enactment suspends or supersedes the 
state law. Sturges v. Crowninshield, 4 Wheat. 122; Ogden 
V. Saunders, 12 Wheat. 213; Baldwin v. Hale, 1 Wall. 22.3; 
In re Reynolds, 9 N. B. R. 50, Fed. Cas. No. 11,723; Ex parte 
Eames, 2 Story, 322, Fed. Cas. No. 4,237; West v. Longis, 
20 La. Ann. 15; Van Nostrand v. Carr, 30 Md. 128; Laven- 
der V. Gosnell, 43 Md. 153; In re Reynolds, 8 R. I. 485; Judd 
V. Ives, 4 Mete. (Mass.) 401; Atkins v. Spear, 8 Mete. (Mass.) 
491; Chamberlain v. Perkins, 51 N. H. 336. Nevertheless it 
is competent for the legislature of a state to enact an in- 
solvency law, although a national bankruptcy law may be 
then in force. Such a law, passed at a time when an act of 
congress establishing a uniform system of bankruptcy is in 
force, is not, indeed, void, but it does not become operative 
(so far as it may be in conflict with the federal act or con- 
current with it) while the latter continues in force; but on 
the repeal of the federal law, the state statute becomes opera- 
tive without re-enactment. Tua v. Carriere, 117 U. S. 201, 
G Sup. Ct. 565; Seattle Coal Co. v. Thomas, 57 Cal. 197. 
See, also, Thornhill v. Bank of Louisiana, 1 Woods, 1, Fed. 
Cas. No. 13,992. On this point we quote the following from 
an opinion of Chief Justice Appleton in Maine: "W^e come 
now to the question whether a state can pass an insolvent or 
bankrupt law during the existence of an act of congress on 
the subject, in other words, whether the act under discussion 
is in force. Its validity is unquestioned, unless absolutely 
void in its inception. No constitutional provision has been 
violated, for the passage of such a law is not merely not 
prohibited, but it is impliedly sanctioned by the clause giving 
congress power over the subject of bankruptcies. The leg- 
islature may pass a law to take effect instantly, or at a future 
day, or on the happening of a future event. If the statute 



§ 70) THE TIME WHEN THIS ACT SHALL GO INTO EFFECT. 273 

had said it was to take effect upon and after the repeal of 
the bankrupt law of congress, there could have been no doubt 
of its validity. But such is the precise effect of the law 
without the intervention of any such provision. The act of 
congress is the paramount law on the subject when called 
into action. The law of the state is subordinate to it. The 
efficient action of the state law is suspended for the time 
being, precisely as in the cases already considered, when a 
national bankrupt law was passed subsequent to a state law 
on the same subject. The state may pass a law which is 
subordinate to the paramount authority of national legisla- 
tion, and is only subordinate to that, but which, when that 
ceases to have force, by reason of its repeal, has at once the 
vigor of law. Whether the law of the state is existent and 
superseded by the subsequent legislation of congress, or is 
inoperative by reason of precedent congressional action, can 
make no difference. In either case, the efficiency of the 
state law is alike suspended and in abeyance while the act of 
congress is in force, and when that is repealed, the law of 
the state at once and instantly becomes operative, and action 
may be had under its provisions." Damon's Appeal, 70 Me. 
153. And see Lewis v. Santa Clara Co., 55 Cal. 604. 

PendiTig Proceedings Under State Laws. 

If a state court has acquired jurisdiction under a state law 
of a case in insolvency, and is engaged in settling the debts 
and distributing the assets of the insolvent, before or at the 
date at which the act of congress upon the same subject 
takes effect, the state court may nevertheless proceed with 
the case to its final conclusion, and its action in the matter 
will be as valid as if no federal law upon the subject had 
been enacted. Martin v. Berry, 37 Cal. 208; Meekins v. 
Creditors, 19 La. Ann. 497; Judd v. Ives, 4 Mete. (Mass.) 401. 
BL. BANK.— 18 



274 ESTATES. (Ch. 7 

Judicial Notice. 

The courts of the various states, being officially cognizant 
of the law of the land, will take judicial notice ai the national 
bankruptcy law and its provisions. Minis v. Swartz, 37 
Tex. 13. 

Nature of Proceedmgs vn Bankruptcy. 

A proceeding against a debtor to have him adjudged a 
bankrupt is a civil proceeding, and not a criminal proceed- 
ing. In re De Forest, 9 N. B. R. 278, Fed. Cas. No. 3,745. 

Construction of Bankruptcy Law. 

The national bankruptcy law should not be subjected to a 
strict or narrow construction, but must be interpreted reason- 
ably and according to the fair import of "its terms. In re 
Muller, Deady, 513, Fed. Cas. No. 9,912. In this case it was 
said by Deady, J.:. "Counsel have insisted that this is a 
special proceeding, purely statutory, and that the act must be 
taken most strictly against the creditor and in favor of the 
bankrupt. In my judgment, this view of the matter is not 
supported by reason or authority. The act does not at- 
tempt to punish the bankrupt, but to distribute his property 
fairly and impartially between his creditors, to whom in jus- 
tice it belongs. It is remedial, and seeks to protect the 
honest creditor from being overreached and defrauded by the 
unscrupulous. It is intended to relieve the honest but unfor- 
tunate debtor from the burden of liabilities which he cannot 
discharge, and allow him to commence the business of life 
anew. The power to pass bankrupt laws is one of the ex- 
press grants of power to the national government; and his- 
tory teaches that the want of a uniform law on this subject 
throughout the states was one of the prominent causes which 
led to the assembling of the constitutional convention and 
consequent formation and adoption of the federal constitu- 
tion. Such a statute is not to be construed strictly, as if it 



Ch. 7) THE TIME WHEN THIS ACT SHALL GO INTO EFFECT. 275 

were an obscure or special penal enactment, and this was tlie 
sixteenth instead of the nineteenth century. The act estab- 
lishes a system, and regulates, in all their details, the relative 
rights and duties of debtor and creditor. Such an act must 
be construed — as indeed should all acts — according to the 
fair import of its terms, with a view to effect its objects and 
to promote justice." 



:}'^'i'fi/,. 



TABLE OF CASES CITED. 



[the figures refer to pages.] 



Abendroth v. Van Dolsen, 47. 
Abrahams, In re, 110. 
Adams, In re, 46. 

V. Boston, H. & B. R. Co., 30. 

V. Crittenden, 64. 

V. Merchants' Bank, 188. 

V. Meyers, 127. 

V. Storey, 270. 

V. Terrell, 35, 108. 
Adler, In re, 154. 
Ahl V. Thorner, 197. 
Aklns V. Stradley, 11, 125. 
Alabama & C. R. Co., In re, 30. 

T. Jones, 30, 31. 
Alden v. Boston, H. & E. R. Co., 

129. 
Alderdlce v. Bank, 200. 
Alexander, In re, 184, 213. 

V. Gait, 253. 
Alleman v. Kneedler, 207. 
Allen, In re, 56. 

V. Ferguson, 104. 

V. Hickling, 96. 

V. Thompson. 79, 91, 108. 
Alsberg, In re, 71. 
Alston V. Robinett, 89. 
American Plate Glass Co., In re, 

222. 
Ames, Ex parte, 195. 

V. Moir, 97. 
Amory v. Lawrence, 264. 
Amoskeag Co. v. Barnes, 102. 
Anderson, In re, 8, 9, 242. 
Angier, In re, 160. 
Anonymous, 23, 27, 100. 
Anshutz V. Hoerr, 199. 

BL. BANK. (2' 



Ansonia Brass Co. v. Babbitt, 

120. 
Apperson v. Stewart, 104. 
Apple V. Crawford Co., 142. 
Appold, In re, 270. 
Arnold v. Maynard, 21. 
Ashuelot Bank v. Frost, 193. 
Ashworth, Ex parte, 115. 
Asten, In re, 72. 
Atkins y. Spear, 272. 
Atkinson v. Farmers' Bank, 22. 

V. Purdy, 124. 
Atlas Nat. Bank v. F. B. Gardner 

Co., 252. 
Augenstein, In re, 93. 
Austin V. Crawford, 99. 
Austin V. O'Reilly, 240. 
Avery v. Hackley, 194. 
Ayers, In re, 179, 216. 



B 



Babbitt v. Walbrun, 201. 
Badger v. Gllmore, 104. 
Bailey, In re, 115. 

V. Glover, 67, 68. 

V. Schofleld, 198. 
Baldwin v. Hale, 271, 272. 

V. Rosseau, 21. 
Balmer, In re, 80. 
Bank of England, Ex parte, 149. 
Bank of Madison, In re, 261. 
Banks, In re, 116. 

V. Ogden, 69. 
Banning v. Bleakley, 99. 
Barbour v. Priest, 205. 
Barnes, In re, 176,' 209, 210. 
77) 



278 



CASES CITED. 



[The figures refer to pages.] 



Barnes v. Rettew, 21. 

v. United States, 219. 

V. Vetterlein, 196. 
Barnett v. Pool, 255. 
Barr v. Bartram & F. Mfg. Co., 

271. 
Barrett, In re, 150. 

V. Durham, 50. 
Barron v. Benedict, 104. 

V. Morris, 133. 

V. Newberry, 254. 
Barrow, In re, 124. 
Barstow v. Adams, 158. 
Bartenbach, In re, 216. 
Bartholomew v. West, 51. 
Barton v. Geiler, 125. 

V. Tower, 27. 
Bassett, In re, 32. 
Bates, In re, 92. 

V. Bradley, 266. 
Baum V. Stern, 63. 
Baxter, In re, 177, 179, 197, 219. 
Bayly, Succession of, 74. 

V. University, 74. 
Beadle, In re, 238. 
Beals, In re, 47. 
Bean v. Brockmire, 196. 
Bear, In re, 110, 118. 
Beardsley v. Hall, 90. 
Beckerford, In re, 267, 269. 
Becket, In re, 73. 
Beisenthal. In re, 20. 
Belcher v. Burnett, 254. 
Bell V. Indian Live Stock Oo., 38. 
Bellis, In re, 83. 
Bennett, Ex parte, 26. 

In re, 74. 
Benson, In re, 263. 
Berford v. Barnes, 127. 
Berrian, In re, 46. 
Bigelow, In re, 218. 
Bininger, In re. 111, 198. 
Bjornstad, In re, 74. 
Blabon v. Hunt, 23. 
Black, In re, 206. 

V. Blazo, 91. 

V. McClelland, 215, 224. 
Blackraore, In re, 73. 



Blackwell v. Claywell, 44. 

Blair v. Allen, 134. 

Blandin, In re, 219. 

Blasdel v. Fowle, 87, 94. 

Bliss, In re, 151. 

Blocke v. Fitche. 65. 

Blodget, In re, 154. 

Blumenth.al y. Brainerd, 159. 

Blumer, In re, 45, 216. 

Boese v. King, 20. 

Bogert, In re, 144. 

Bolton V. King, 104. 

Book. In re, 26. 

Boone v. Hall, 125. 

Boothroyd, In re, 52. 

Boston. H. & E. R. Co., In re, 14, 

115, 130. 
Boston & Pairbaven Iron Works, 

Case of, 223. 
Bourne, Ex parte. 115. 

V. May bin, 221. 
Bouton, In re, 184. 
Boutwell V. Allderdice, 11. 
Boyd, In re, 65. 
Boynton, In re. 35, 81. 

V. Ball, 62, 88. 
Bradley, In re, 45. 

V. Healey, 12. 
Brady v. Brady, 89. 
Brand. In re, 177. 
Brandon v. Sands, 259. 
Breck, In re, 223. 
Brett V. Carter, 193. 
Brewer v. Boynton, 104. 
Brick, In re, 54. 
Bridgman, In re, 231. 
Briggs, Ex parte. 87, 94. 
Brigham v. Claflin. 126. 

V. Home Ins. Co., 2."i8. 
Bright, In re, 87. 
Briswalter v. Long, 44. 
Broach v. Powell. 127. 

V. Smith, 88. 
Brock V. Hoppock, 114. 
Brockway, In re, 78, 83, 89. 
Broich, In re, 176, 216, 242. 
Bromley v. Smith, 259. 
Brooks V. Abrens, 259. 



CASES CITED. 



(Tbe figures refer to pages.] 



Brown, In re, 50, 229. 

V. Broach, 96. 

V. J"'armers' Bank, 247. 

V. Jefferson Co. Nat. Bank, 
190. 

T. Pike, 33. 

V. Smart, 271. 
Browning v. Crovise, 75. 
Brownsville Mfg. Co. v. Lock- 
wood, 73. 
Bruce, In re, 180. 
Brunquest, In re, 239. 
Brunswig v. Taylor, 99. 
Buchstein, In re, 93. 
Buckhause, In re, 218. 
Buckingham v. McLean, 80. 
Buffington v. Harvey, 157. 
Burhank v. Bigelow, 124-126. 
Burch, In re, 185. 
Burchell, In re, 75. 
Burgett V. Paxton, 238. 
Burk, In re, 80, 81. 
Burnhisel v. Firman, 192, 196. 
Burr V. Hopkins, 178. 
Burt, In re, 20, 163, 239. 
Burton, In re, 13. 
Bush V. Lester, 48. 

V. Stanley, 88. 
Butterfield, In re, 80. 
Byers v. Bank, 63. 



Cady V. Whaling, 207. 
California Pac. R. Co., In re, 30, 

31, 268. 
Camden Rolling Mill Co., In re, 

116. 
Campbell v. Bank, 198. 
Campfield v. Lang, 38. 
Canady, In re, 78. 
Canfield, In re, 108. 
Cannon v. Wellford. 252. 
Capital Publishing Co., In re, 34. 
Cardot v. Barney, 159. 
Carey v. Hess, 73. 



Carpenter v. Longan, 265. 
Carrier, In re, 240. 
Casey, In re, 12. 
Catlin V. Foster, 245. 

V. Hoffman, 193. 
Cavanna v. Bassett, 73. 
Caylus, Fx parte, 244. 
Chamberlain, In re, 21, 228. 

V. Perkins, 272. 
Chandler, In re, 34. 
Chaplin v. Lee, 97. 
Chapman, In re, 33. 

V. Brewer, 117. 

Y. Forsyth, 98, 99. 
Charles, Ex parte, 224. 
Chase, In re, 228. 
Chemung Canal Bank v. Judson, 

9. 
Chicago & N. W. Ry. Co. v. Jenk- 
ins, 67. 
Citizens' Bank v. Ober, 162. 
Claflin V. Houseman, 124. 
Clairmont, In re, 150, 151. 
Clanton v. Estes, 237. 
Claridge v. Kulmer, 201, 238. 
Clarion Bank v. Jones, 198. 
Clark, In re, 61, 79, 129, 133, 260. 

V. Atkinson, 104. 

V. Binninger, 8, 260. 

V. Clark, 68. 

V. Bwing, 125. 

V. Iselin, 133, 193, 195. 
Clarke, In re. 202. 
Classen v. Schoenemann, 97. 
Cleveland Ins. Co., In re, 175. 
Coan & Ten Broeke Mfg. Co., In 

re, 261. 
Coates V. Blush, 87, 94. 
Cobb V. Rice, 14. 
Coclis, In re, 32. 
Cogdell V. Exum, 67, 125. 
Cogswell, In re, 152. 
Coit V. Robinson, 133. 
Cole V. Roach, 224. 
Collier v. Simpson, 50. 
Collins, In re, 28, 239. 
Columbian Ins. Co., Ex parte, 
221. 



2S0 



CASES CITED. 



[The figures refer to pages.] 



Comegys v. "\'asse, 254. 
Commercial Bulletin Co., In re, 

223. 
Com. V. Butler, 37T. 

V. Iving, 97. 

V. Natural Gas Co., 33. 

V. Tuckerman, 97. 
Comstock, In re, 122. 

V. Wheeler, 180. 
Conant, In re, 68. 
Conner v. Long, 251. 
Connor, In re, 80, 196. 

V. Scott, 124. 
Cook, In re, 44, 210. 

V. Sherman, 68. 
Cookingham v. Ferguson, 207. 

V. Morgan, 207. 
Copeland t. Stephens, 264. 
Corbett, In re, 50. 
Corey v. Ripley, 89. 
Corn Exchange Bank, In re, 176, 

229. 
Cornwall, In re, 113, 217. 
Corwin, In re, 93. 
Cosgrove v. Cosby, 244. 
Cottrell V. Pierson, 241. 
Coulter, In re, 240. 
Courtney v. Beale, 102. 
Covell V. Heyman, 128. 
Cowderly v. Railroad Co., 159. 
Cowdin V. HufC, 37. 
Coxe V. Hale, 22, 183. 
Craft, In re, 22, 86, 191, 204. 
Cragin v. Carmichael, 266. 

V. Thompson, 20. 
Craig V. Seitz, 104. 
Crane v. Penny, 205, 237. 
Crawford, In re, 215. 

V. Dunbar, 142. 
Crisfield r. State, 102. 
Crocker v. Bank, 259. 
Crockett, In re, 43. 
Croft, In re, 20, 47. 
Cromer v. Cromer, 102. 
Crooks V. Stewart, 236. 
Cullen V. Dawson, 264. 
Currier, In re, 179, 183. 



Daggett, In re, 130. 

Dailey v. State, 142. 

Dalby, Ex parte, 237. 

Dambmann v. White, 157. 

Damon's Appeal, 273. 

Daniels, In re, 221. 

Darby v. Boatman's Sav. Inst, 

195. 
Darling v. Berry, 269. 

V. Townsend, 205. 
Davenport, Ex parte, 176. 
Davidson v. Fisher, 62. 
Davies, In re, 115. 
Davis, In re, 63, 125, 175. 

V. Armstrong, 19. 

V. McCurdy, 222. 

V. Railroad Co., 129. 
Day V. Superior Court, 263. 
Dean v. Speakman, 222. 
De Forest, In re, 274. 
Dell, In re, 218. 
Derby, In re, 20, 27. 
Dessau v. Johnson, 66. 
Dewdney, Ex parte, 217. 
Dewey v. Meyer, 104. 
Dey, In re, 240. 
Dibblee, In re, 135. 
Dillard v. Collins, 259. 
Dole, In re, 57. 
Donald v. Kell, 96. 
Donaldson, In re, 78. 

V. Farwell, 127, 262. 
Donnelly, In re, 80, 110. 
Douglass, In re, 92, 94. 

V. Vogeler, 192. 
Dow, In re, 244. 
Downing v. Traders' Bank, 216, 

220. 
Doyle, In re, 198. 
Dozier v. Wilson, 269. 
Drake v. RoUo, 245. 
Driggs V. Moore, 19. 
Drisko, In re. 90. 
Drummond, In re, 178. 
Dudley's Case, 26. 



CASES CITED. 



281 



[The figures refer to pages.] 



Duff, In re, 33. 
Dumahaut, In re, 55. 
Duncan, In re, 117, 185. 
Dunham, In re, 113. 
Dunkerson, In re, 240, 243. 
Dunning v. Perkins, 202. 
Du Pont V. Beck, 90. 
Duryee, In re, 63. 
Dusenberry v. Hoyt, 104. 
Dutcher v. Bank, 156. 



Eames, Ex parte, 272. 

Ecker v. Bohn, 87, 184, 220. 

Eckler v. Galbraith, 105. 

Edmondson y. Hyde, 236, 251. 

Ekings, In re, 87. 

Elder, In re, 175. 

Eldridge, In re, 218. 

Elliott V. Higgins, 102. 

Emery v. Bank, 218. 

Erie Rolling Mill Co., In re, 229. 

Erwin v. United States, 258. 

Esmond v. Apgar, 68. 

Evans, In re, 12. 

V. Eaton, 267. 
Everett v. Stone, 86. 
Eyster v. Gaff, 66, 124, 126. 



Factors' & Traders' Ins. Co. v. 

Murphy, 161. 
Fagnan v. Knox, 97. 
Fairbanks v. Amoskeag Nat. 

Bank, 74. 
Falkland v. Bank, 99. 
Farnsworth, In re, 244. 
Farris v. Richardson, 27. 
Faxon, Ex parte, 223. 
Felker v. Crane, 48. 
Felter, In re, 180. 
Ferguson v. Peckham, 12. 
Field V. United States, 228. 
Fillingin v. Thornton, 26. 



Findlay, In re, 113. 
First Nat. Bank v. Hovey, 232. 
Fisher v. Currier, 90. 
Flanagan, In re, 25. 

V. Pearson, 101. 
Flanders v. Abbey, 13. 
Fleming v. Andrews, 188, 246. 

V. LuUman, 105. 
Flournoy v. Newton, 26. 
Flower v. Greenbaum, 72, 74. 
Fogarty v. Gerrity, 13. 
Foot, In re, 194. 
Ford v. St. Louis, K. & N. W. R. 

Co., 37. 
Forsaith v. Merritt, 207. 
Forsyth, In re, 78. 
Foster, Ex parte, 12. 

V. Ames, 210. 

V. Hackley, 198, 263. 
Fowler, In re, 24, 79. 

V. Wood, L>1. 
Fox V. Eckstein, 23. 

V. Gardner, 197. 
Foye, In re, 214. 
Fraley v. Kelly, 104. 
Frantzen, In re, 205. 
F'reeman, In re, 80. 
Freudenfels, In re, 112. 
Frey, In re, 83, 85. 
Frisbee, In re, 20. 
Frisbie, In re, 57. 
Fry y. Street, 157. 
Fuller, In re, 10. 

v. Pease, 89. 
Fulton v. Hammond, 100. 
Fulwood V. Bushfield, 220. 
Funkenstein, In re, 185. 



G 

Gaffney v. Signaigo, 195. 
Gallagher, In re, 256, 257. 
Gallinger, In re. 111. 
Garrett, In re. 97. 
Garrison, In re, 82. 
Gary v. Bates, 238. 
Gassett v. Morse, 19. 



282 



CASES CITED 



[The figures refer to pages.] 



Gates V. Fraser, 160. 

Gauss V. Schrader, 46. 

Gay, In re, 83, 198. 

(iaytes v. American, 158. 

(Jazin V. Norton, 211. 

Geisreiter v. Sevier, 144. 

(ieorge. In re, 47. 

(ieoi-gia Railroad v. Cuboedge, 

!)f). 
Getcliell, In re, 110, 117. 
Gibson v. Carruthers, 263. 

V. Dobie, 197. 

V. Gorman, 103. 
Gilbert, In re, 121. 

V. Lynch, 232. 
Gildersleeve v. Gaynor, 68. 
(^ile. In re. 26. 
(4ilnian v. Ijoclcwood, 271. 
Glenn v. Abell, 213. 

V. Howard, 264. 
Glenny v. Langdon, 266. 
Globe Ins. Co. v. Cleveland Ins. 

Co., 21, 189. 
Golson V. Niehoff, 202. 
Goodall V. Tuttle, 268. 
Goodfellow, In re, 25, 35. 
Goodman, In re, 29. 
Goodricb v. Dobson, 244. 

V. Hnuton, 90. 

V. Remington, 129. 

V. Wilson, 126. 
Gordon v. Jennings, 37, 317. 
Gorham, In re, 41. 
Goss V. Coffin, 255. 
Graham, In re, 51. 

V. Boston, H. & B. R. Co., 117. 

V. Stark, 198, 200. 
Grant v. Bank, 200. 
Graves, In re, 81, 84, 178. 

V. Wright, 88. 
( Jray v. Rollo, 246. 
Green, In re, 180, 183. 

V. Chilton, 100. 
Green Pond R. Co., In re, 128, 

183. 
Greenville & C. R. Co., In re, 30. 
Greenvi^ald v. Appell, 78. 
Griel v. Solomon, 10."). 



Griffin, In re, 49. 

Grover & Bakei- Sewing Mach. 

Co. V. Clinton, 100. 
Guilfoyle v. Anderson, 100. 
(jiuptil v. McFee, 50. 
Gnrney, In re, 156. 



H 



Haake, In re, 216. 
Haas V. O'Brien, 189. 
Hadley, In re, 109. 
Hafer, In re, 50i 
Hale V. Christy, 258. 
Halford, Ex parte, 74. 
Halsey v. Norton, 44. 
Hamlin, In re. 115. 
Hammond, In re, 84. 
Hampton v. Rouse, 253, 262. 
Handlin, In re, 50. 
Hannahs, In re, 71. 
Hapgood, In re, 188. 
Harcourt, Ex parte, 115. 
Hardenbrook v. .Colson, 99. 
Hardin, In re, 217. 
Harding v. Crosby, 157. 
Hardy v. Carter, 220, 
Harris, Ex parte, 116. 

In re, 26. 

V. Bank, 196. 
Harrison v. Gamble, 75. 
Hasbrouck, In re, 144. 
Hathorn, In re, 41. 
Hatje, In re, 115, 220. 
Havens, In re. 151, 254. 
Hawkins v. Hastings Bank, 134. 
Hayes v. Ford, 9. 
Hayman v. Pond, 99. 
Haynes, In re, 150. 
Hays V. Ford, 224, 
Hazens, In re, 183. 
Hazleton v. Valentine, 59. 
Heard v. Sturgls, 259. 
Hedley, Ex parte, 97. 
Heffren v. Jayne, 101. 
Heftron, In re, 186. 
Heller, In re, 82, 190 



CASES CITED. 



283 



[The figures refer lo pages.] 



Helmbold v. Heliiibokl Mfg. Co., 

257. 
Hempsted v. Bauk, 271. 
Henderson, In re, 9, 111, 185. 
Henkel, In re, 51. 
Henkelman v. Smith, 190. 
Henly v. Lanier, 49. 
HenneQuin v. Clews, 100. 
Hennessee v. Mills, 89. 
Hennocksburgh, In re, 223. 
Hercules Mut. Ins. Co., In re, 31. 
Herdie, In re, 80, 86. 
Herman v. Lynch, 103. 
Herndon v. Davenport, 265. 
Hersey v. Fosdiclc, 232. 
Hester, In re, 48, 49. 

V. Baldwin, 80. 
Hewett V. Norton, 63. 
Heydette. In re, 112. 
Hicks, In re, 144. 

T. Railroad Co., 159. 
Hill, In re. 55, 80. 

V. Harding, 62, 64. 
Hirshberg, In re, 229. 
Hitchcock V. Rollo, 245. 
Hobough V. Murphy, 104. 
Hobson V. Markson, 260. 
Hoffman v. Haight, 88. 
Holbrook v. Dickenson, 162. 
Holgate, In re, 92. 
Holland. In re, 179. 

Y. Heyman, 32. 

V. Withers, 52. 
Hollenshade, In re, 82. 
Hollister, In re, 220. 
Hood V. Harper, 202. 
Hoole, In re, 135. 
Hoover v. Wise, 202. 
Hopkins v. Carpenter, 9. 
Horner v. Spelman, 90. 
Horton, In re, 188. 
Hosmer v. Jewett, 261. 
Hough V. Bank, 192. 
Houston V. City Bank, 161. 

V. State, 222. 
Hovey, In re, 232. 
Howard, In re, 218. 

V. Crompton, 251. 
Howe V. Sheppard, 227. 



Howes V. Holmes. 02. 
Howland, In re, 29. 

V. Carson, 89, 224. 
Hoyt, In re, 229. 
Hubbard, In re, 177. 
Hubbell V. Cramp, 88. 
Hudgins v. Lane, 47. 
Hughes, In re, 47, 210. 

V. Oliver, 96. 
Hulst, In re, 129. 
Hunker v. Bing, 211. 
Hunt, In re, 48, 83, 85. 
Hussman, In re, 23. 
Hyde, In re, 102. 

v. Tuffts, 259. 

V. Woods, 194, 257. 
Hyman, In re, 144. 
H.yndman, In re, 242. 
Hyslop V. Hoppock, 15. 



I 



Independent Ins. Co., In re, 31, 

214. 
Indianapolis', C. & L. R. Co., In 

re, 116. 
International Bank v. Jenkins, 

67. 
Iron Mountain Co., In re, 63. 
Ironsides, The. 11. 
Isaacs, In re, 46. 
Isett V. Stuart, 125. 
Israel, In re, 183. 
Ives, In re, 117. 



J 



.Tack, In re, 115. 
Jackson, In re, 177. 

V. McCulloch, 21, 189, 199. 
Jaycox, In re, 181. 
Jeffries v. Bartlett, 49. 
Jemison v. Blowers, 214. 
Jenkins v. International Bank, 
67, 156. 

V. Mayer, 195. 

V. Pierce, 2.52. 



284 



CASES CITED. 



[The figures refer to pages.] 



Jerome v. McCarter, 237. 
Jewett, Ex parte, 185. 

In re, 42, 86, 183. 
Jobbins v. Montague, 108. 
Jobann, In re, 184. 
Johnson, In re, 195. 

V. Auditor, 96. 

V. Bishop, 130, 260. 

V. Gallagher, 28. 
Jones, In re, 48. 

V. Knox, 102. 

V. Newsom, 262. 

V. Russell, 99, 103. 

V. Sleeper, 21. 
Jordan, In re, 213, 269. 

V. Downey, 125, 126. 
Jorey, In re, 86. 
Joseph, In re, 71. 
Judd V. Ives, 272, 273. 
Judson V. Courier Co., 188. 



K 



Kahley, In re, 161. 
Kallish, In re, 81. 
Kaufman v. Alexander, 100. 
Keach, In re, 83, 85. 
Keating v. Keefer, 51. 
Keenan v. Shannon, 15. 
Keene v. Mould, 267. 
Kelly, In re, 78, 214. 

V. Smith, 8. 
Kelso's Appeal, 160. 
Kenyon, In re, 34. 
Keyser, In re, 176. 
Kidder v. Horrobin, 125. 
Kimball, In re, 33, 99. 
Kimberling v. Hartly, 66, 158, 264. 
King, In re, 211. 

V. Bowman, 161. 

V. Deitz, 266. 

V. Remington, 264. 
Kingsbury v. Mattocks, 259. 
Kingsland v. Spalding, 103. 
Kingsley, In re, 217. 

V. Kingsley, 50. 
Kinliead, In re, 28, 29. 



Kinzie t. Winston, 255. 
Kirtland, In re, 13, 161. 
Knight, In re, 45. 
Knoepfel, In re, 175. 
Rnowlton v. Moseley, 265. 
Kraft, In re, 80. 
Krueger, In re, 43. 
Kunzler v. Kohaus, 268. 
Kyle T. Bosticli, 220. 
Kyler, In re, 176, 219. 



Laeey, In re, 186. 
Lake Superior Ship Canal, Rail- 
road & Iron Co., In re, 150. 
Lakin y. Bank, 157. 
Lammer, In re, 52. 
Lane, In re, 246. 

V. Nickerson, 266. 
Lang V. Simmons, 38. 
Langdon, In re, 72. 
Lansing v. Manton, 15. 
Lastrapes v. Blanc, 29, 185. 
Lathrop v. Drake, 125. 

V. Nelson, 162. 
Lavender v. Gosnell, 272. 
Lavie v. Phillips, 28. 
Lawrence, In re, 21. 
Lawyer v. Gladden, 29. 
Lazear v. Porter, 160. 
Leavenworth Sav. Bank, In re, 

184. 
Leeds, In re, 23. 
Le Favour, In re, 118. 
Leighton, In re, 13. 
Leland, In re, 40, 178. 
Lemcke v. Booth, 99. 
Leo V. Joseph, 71. 
Leonard, In re. 111. 

V. Yohuk, 88. 
Letchworth, In re, 215, 242. 
Levy, In re, 56. 
Lewis v. Santa Clara Co., 273. 

V. Sloan, 117. 

v. U. S., 226-228. 
Libby v. Hopkins, 245. 



CASES CITED. 



285 



[The figures refer to pages.] 



Liddell v. Wlswell, 220. 
Light V. Werriam, 102. 
Ligon V. Allen, 75. 
Lipscomb V. Grace, 220. 
Lissburger, In re, 70. 
Litchfield, In re, 45. 
Little, In re, 13, 47. 

V. Alexander, 204. 

V. Dusenberry, 159. 
Littlefield, In re, 79. 
Livermore v. Bagley, 23. 
Livingston v. Bruce, 194. 
Lloyd, In re, 45. 

V. Turner, 247. 
Locke, In re, 205. 
Loder, In re, 215. 
Longest, In re, 177. 
Lord, In re, 103. 
Loring, In re, 180. 
Louchelm v. Henzey, 190. 
Louisville, E. & St. L. R. Co. v. 

Wilson, 38. 
Lowenstein, In re, 78. 
Ludellng v. Felton, 90. 
Lumpkin v. Bason, 50. 
Lyons, In re, 28. 



M 

McAden v. Keen, 243. 
McDonald, In re, 180. 

V. Davis, 62. 

V. State, 102. 
McDowell, In re, 56. 
Mace V. Wells, 220. 
McFaden, In re, 167. 
McFarland v. Goodman, 51. 
McGehee v. Hentz, 9. 
McGilton, In re, 161. 
McGlynn, In re, 151. 
McGregor v. Balch, 142. 
McGuire, In re, 178. 
McHenry v. Davies, 28. 

V. Societe Francaise, 241. 
McKenna, In re, 255. 

V. Simpson, 126. 
McKinley, In re, 117. 



McLean v. Johnson, 21. 

V. Klein, 223. 

V. Lafayette Bank, "86, 268. 

V. Meline, 21. 

V. St. John, 125. 
McMinn v. Allen, 101. 
McNaughton, In re, 110. 
McNeil V. Knott, 215. 
McNutt V. King, 44. 
Madison Tp. v. Dunkle, 101. 
Magie, In re, 13. 
Mahoney, In re, 152. 
Major, In re, 12. 
Mall V. Ullrich, 92. 
Mallory, In re, 8. 
Mann v. Flower, 125. 
Manufacturers' Nat. Bank, In re, 

35. 
Manwarring v. Kouns, 90. 
March v. Heaton, 253. 
Marioneaux's Case, 92. 
Marks v. Barker, 244. 
Markson v. Heany, 8. 

V. Hobson, 202. 
Marrett v. Atterbury, 220. 
TUarsh'V. Armstrong, 248. 
Marshall, In re, 83. 

V. Knox, 260. 

V. Tray, 104. 
Marston, In re, 33. 
Martin v. Berry, 270, 273. 

V. Toof, 200. 
Marvin, In re, 27, 28. 
Matteson v. Kellogg, 99. 
Matthewman, In re, 28. 
Matthews v. Westphal, 195. 
Mattingly v. Stone, 257. 
Mattocks v. Baker, 237. 

V. Lovering, 247. 
Maxwell v. Evans, 99. 
May V. Howe, 91. 

V. Le Claire, 189, 198, 200. 

V. New Orleans & C. R. Co., 
270. 
Mayer v. Hellman, 21. 

V. Hermann, 190, 201. 
Mays V. Bank, 263. 

V. Fritton, 204. 



286 



CASES CITED. 



[The flares refer to pages.l 



Mead, In re, 180. 

V. Bank of Fayetteville, 218. 

V. Nati'onal Bank of Fayette- 
ville, 45. 
Meara v. Holbrook, 159. 
Medsker v. Bonebrake, 41, 47. 
Meekins v. Creditors, 273. 
Meeks v. Wliatley, IGO. 
Mendell, Ex parte, 200. 
Mendelsohn, In re, 21, 115. 
Merchants' Ins. Co., In re, 24, 31, 

128. 
Merrell, In re, 213. 
Merrick's Estate, 252. 
Merrill. In re, 175. 

V. Schwartz, 214. 
Merritt, In re, 33. 
Metcalf V. Officer, 43, 201. 
Michaels v. Post, 117, 184. 
Milhons v. Arcardi, 89. 
Miller, In re, 10, 125. 

V. Jones, 134. 
Mills T. Auriol, 221. 
Mims V. Swartz, 274. 
Minon v. Van Nostrand, 59. 
Minot V. Tappan, 67. 
Mitchell, Ex parte, 149. 
Mock V. Howell, 98. 
Moller, In re, fl3. 
Monongahela Bank v. Overholt, 

259. 
Montgomery, In re, 179. 

T. Bucyrns Machine Works, 
2G2. 
Moore, In re, 41. 

V. Jones, 9, 259. 

V. Stanwood, 74. 

V. Young, 236, 251. 
Morgan v. Brundrett, 86. 
Morrill, In re, 236, 251. 
Morris, In re, 8. 
Morrison v. Savage, 98. 
Morse, In re, 186. 

V. Godfrey, 116. 

V. Hovey, 220, 207. 

V. Hutchins, 96. 

V. Lowell, 101. 
Moses, In re, 254. 



Miiunt V. Manhattan Co., 117. 
Moyer, In re, ~>1. 

V. Dewey, 266. 
MuUer, In re, 60, 274. 
Murdock, In re, 79. 
Murphy v. Crawford, 104. 
Murray, In re, 93. 

V. De Rottenham, 89. 

V. Riggs, 244. 
Murrln, In re, 258. 
Myers v. Callaghan, 253. 

V. Hazzard, 265. 



N 



Nash V. Simpson, 264. 
National Bank v. Warren, 190. 
National Life Ins. Co., In re, 128. 
Neal V. Clark, 96, 99. 
Nebe, In re, 119. 
Needham, In re, 54, 81. 
Negley, In re, 75. 
Nesbit V. Macon Co., 201. 
New Amsterdam Ins. Co., In re, 

14. 
New Brunswick Carpet Co., In 

re, 180. 
Newcomb, In re, 163. 
Newell V. Smith, 159. 
Newman, In re, 83. 
New Orleans v. Le Blanc. 34. 

V. Mannessier, 34. 
New Orleans, S. F. & L. R. Co. v. 

Delamore, 30. 
New York Mail S. S. Co., In re, 

211, 231. 
Nicholas v. Murray, 91, 157, 217. 
Nichols V. Eaton, 263. 
Noble, In re, 150. 

y. Hammond, 101. 
Noesen, In re, 217, 
Noonan, In re, 43, 47, 
Norton v. De La Villebeuve, 69. 

V, Switzer, 6G, 
Norwood, Ex parte, 219. 
Noyes, In re, 56, 210. 
Nudrt V, Burrows, 196, 
Nutter V. Wheeler, 127. 



CASES CITED. 



287 



[The flgvu-es refer to pages.] 







Oakey v. Bennett, 255. 
Gates V. Parisb, S9. 
O'Brien, In re, 28. 
Odell, In re, 32. 
O'Fallon, In re, 1G2. 
Ogden V. Saunders, 271, 272. 
O'Halloran. In re, 110. 
Oliver V. Sanborn, 2(15. 
Olney v. Tanner, 2G6. 
O'Mara, In re, 59. 
O'Nell, Ex parte, 215. 

V, Dougherty, 156. 

V. Glover, 23. 
Oregon Bulletin Co., In re, 114. 
Oregon B. & P. Co., In re, 184. 
Oregon Iron Works, In re, 158. 
Orne, In re, 222. 
Ostrander v. Meunch, 200. 
Otis V. Hadley, 126, 200, 
Ouimette. In re, 114. 
Owens. In re, 267. 
Owsley V. Cobin, 99. 
Oxford Iron Co. v. Slafter, 206. 



Palmer, In re, 13, 87. 

V. Hussey, 98. 

V. Preston, 96. 
Pankey v. Nolan, 100. 
Paret v. Ticknor, 72. 
Parker v. Atwood, .S9. 

V. Bradford, 214. 
Parks V. Goodwin, 90. 
Parsons v. Caswell, 191. 

V. ToplifC, 205. 
Partridge v. Dearborn, 236, 252. 
Patterson, In re, 24. 
Payson v. Coffin, 67, 68. 

V. Dietz, 124. 

V. Stoever, 15. 
Peale v. Phipps, 128. 
Pearce, In re, 81. 
Pearson, In re, 150. 
Pease, In re, 180. 



Peiper v. Harmor. 12."i. 
Peltasohn. In re, 253. 
I'enn, In re, 79. 
Pennsylvania & D. R. Co. v. 

Leuffer, 39. 
People V. Burr, 97. 

V. Dry-Dock Co., 34. 

V. Duncan, 250. 

V. McKinney, 97. 

V. Meyers, 38. 

V. Remington, 37, 38, 317. 

V. Whitman, 142. 
People's Mail S. S. Co., In re, 62. 
Perdue, In re, 50. 
Perkins, Ex parte, 153. 
Perry, In re, 55. 

V. Langley, 21. 
Phelan v. Iron Mountain Bank, 

261. 
Phelps V. Clasen, 112. 

V. McDonald, 68, 258. 
"Philadelphia Axle Works, In re, 

116. 
Phillips V. Russell, 103. 
Phipps V. Sedgwiclv, 265. 
Pieard v. Hiue, 28. 
Pierce, In re. 156. 

V. Evans, 199. 
Pike V. Lowell, 68. 
Pine Hill Coal Co. v. Harris, 88. 
Pitt, In re, 42. 
Place, In re, 134. 
Piatt v. Archer, 14. 

V. Stewart, 133. 
Player v. Lippincott, 192. 
Plumb, In re, 42. 
Poleman, In re, 52. 
Pond V. Kimball, 50. 
Porter v. Lazear, 160. 

V. Sabin, 128. 
Portsmouth Sav. Fund Soc, In 

re, 152. 
Post V. Corbin, 202. 

V. Losey, 220. 
Potts, Ex parte, 20, 108. 
Powell, In re, 151. 
I'ratt, In re, 27. 

V. Curtis, 263. 



CASES CITED. 



[Tbe figures refer to pages.] 



Prescott, In re, 217. 
Price, In re, 50, 11-1, 154. 

V. Price, 11, 127. 
Prichett t. Kelly, 266. 
Prouty, m re, 154. 
Pryor, In re, 160. 
Pulslfer, In re, 216. 
Pulver, In re, 54. 
Pupke V. Churchill, 75. 
Purvis, In re, 149. 
Putnam v. Story, 254. 



Radford v. Thornell, 127. 
Eaffauf, In re, 117. 
Ragsdale, In re, 33. 
Ramsey v. Fellows, 66. 
Randall, jux parte, 116. 

In re, 21, 26, 109, 197. 
Ranldn v. Barcroft, 261. 

V. Florida, A. & G. 0. R. Co.: 
30. 
Ransom v. Geer, 75. 
Ratcliffe, In re, 55. 
Ray, In re. 55, 217. 

V. Lapham, 91. 

T. Norseworthy, 161. 
Rayl V. Lapham, 117. 
Raynor. In re, 109. 
Keber v. Gundy, 193. 
Reed, In re, 86, 217. 

V. Bank of Newburgh, 97. 

V. Cowley, 111. 

V. Pierce, 214. 

V. Vaughn, 9. 
Reg. V. Rogers, 97. 
Reiman, In re, 70. 
IJeitz V. People, 102. 
Republic Ins. Co., In re, 15. 
Rex V. Pixley, 95. • 
Reynolds, In re, 272. 
Rice V. Melendy, 200. 
Richards, In re, .'i6. 

V. Insurance Co.. 252. 
Richardson, In re, 00, 62. 
Richmond v. Brown, 101. 



Richter's Estate, In re, 178. 
Riggin V. Magwire, 221. 
Riggs V. Roberts, 104. 
Riley v. Warden, 38. 
Rison V. Knapp, 198. 

V. Powell. 126. 
Rix V. Capital Bank, 51. 
Roberts v. Atherton, 271. 
Robinson, In re, 177. 

V. Denny, 254. 

V. Soule, 73. 

V. Wilson, 49. 
Rockford, R. I. & St. L. R. Co., 

Ex parte, 158. 
Roddin, In re, 46. 
Rogers, In re, 139. 

V. Palmer, 191, 201. 

V. Stone Co., 162. 
Rollins V. Twitchell, 247. 
Roseberry, In re, 240. 
Rosenbaum v. Garnett, 12. 
Rosenfield, In re, 82. 
Rosenflelds, In re, 185, 186. 
Rosenthal v. Walker, 68. 
Rosey, In re, 227. 
Ross V. Jordan, 104. 

V. Wilcox, 67. 
Euddick v. Billings, 133. 
Ruiz V. Eickerman, 89. 
Runzi, In re, 191. 
Russell, Ex parte, 95. 

V. Owen, 247. 

V. Rogers, 73. 
Ryan v. Hook, 36. 



Sacchi, In re, 63. 

Safe Deposit and Sav. Inst., In 

re, l:i8. 
Sage f . Wyncoop, 190. 
St. Helen Mill. Co., In re, 156. 
Salkey, In re, 57. 
Samson v. Clarke. 12. 
Sanderson v. Daily, 90. 
Sandford v. Lackland, 262. 
Sands Ale Brewing Co., In re, 

239. 



CASES CITED. 



289 



[The figures refer to pages.] 



Sanford v. Huxford, 184. 
Sanger v. Upton, 15. 
Sargent, In re, 112, 116, 186. 
Saunders, In re, 149, 179. 

V. Com., 90. 

V. Mitchell, 28. 
SauthofE, In re, 11, 50, 240. 
Savage, In re, 163. 
Sawin v. Martin, 97. 
Sawyer v. Hoag, 244. 

V. Turpln, 192, 196, 198. 
Sayre v. Glenn, 213. 
Scammon, In re, 185. 

V. Cole, 200, 203. 

V. Kimball, 245. 
Schick, In re, 192. 
Schlitz V. Schatz, 51, 
Schneider, In re, 211. 
Schnepf, In re, 260. 
Schrenkelsen v. Miller, 158. 
Schuchardt, In re, 223. 
Schulenburg v. Kabureck, 157. 
Scbulze V. Bolting, 239. 
Schuyler, In re, 82. 
Schwartz, In re, 224. 
Schwarz, In re, 65. 
Scott V. Kelly, 125. 

V. Porter, 99. 
Scovill V. Shaw, 67. 
Scrafford, In re, 115, 183. 
Seattle Coal Co. v. Thomas, 272. 
Seavey v. Maples, 125. 
Second Nat. Bank of Louisville v. 

N.at. State Bank, 11, 162, 264. 
Sedgwick v. Menck, 129. 

V. Place, 15. 

V. Stewai't, 241. 
Selling V. Gunderman, 49. 
Serra v. Hoffman, 66. 
Seymour, In re, 59. 

V. Street, 89, 91. 
Sharp V. Warehouse Co., 197. 
Shaw, In re, 71, 76. 
Shawhan v. Wherritt, 116. 
Shay V. Sessaman, 258. 
Sheehan, In re, 60. 
ShefCer, In re, 186. 
Sheldon v. Bounds, 49. 
•BL. BANK.— 19 



Shepard, In re, 217. 
Sherman v. Bingham, 10. 

V. International Bank, 111, 
257. 
Sherwood, In re, 32. 

V. Burns, 125. 
Shields V. Coleman, 128. 
Shoemaker, In re, 138. 
Shuman v. Fleckenstein, 158. 
Sicard v. Buffalo, N. Y. & P. R. 

Co., 134. 
Sigsby V. Willis, 213. 
Sill V. Solberg, 197. 
Silverman, In re, 113. 
Simpson v. Houston, 49. 
Sims, In re, 93. 
Singer v. Jacobs, 203. 
Skelley, In re, 114. 
Skylark, The, 241. 
Sloan, In re, 78. 
• V. Lewis, 185, 216. 
Smith, In re, 20, 21, 38, 81, 83, 
85, 99. 

V. Brlnckerhoff, 247. 

T. Hodson, 95. 

V. Little, 197. 

V. Profitt, 262. 

V. Ramsey, 89, 91. 

V. Smith, 160. 
Soils, In re, 57. 
Sonneborn v. Stewart, 118. 
Southern v. Fisher, 126. 
Southern Minn. B. Co., In re, 30. 
Southwestern Car Co., In re, 228. 
Southwick V. Whipple, 188. 
South & North Alabama R. Co. 

V. Falkner, 37. 
Spalding v. Dixon, 222. 

V. New York, 96. 
Spindle v. Shreve, 262. 
Stamp, Ex parte, 27. 
State V. BaumhageV, 97. 

V. Gaston, 89. 

V. Shelton, 96. 

V. Valle, 142. 

V. Wolff, 97. 
State Ins. Co., In re, 221. 
State Nat. Bank v. Reilly, 209. 



290 



CASES CITED. 



[The figures refer to pages.] 



State Savings "Ass'n t. Kellogg, 

32. 
Steadman v. Jones, 159. 
Steele v. Graves, 102. 
Steinman, In re, 113, 186. 
Stemmons v. Burford, 65. 
Stephens, In re, 178. 
Stetson V. Bangor, 89. 
Stevens, In re, 43, 52, 178. 

V. Brown, 89. 
Stevenson v. McLaren, 249. 
Stewart v. Brown, 50. 

V. Hargrove, 256. 

V. Piatt, 236, 237. 
Stlckney v. Wilt, 134. 
Stiles V. Lay, 79. 
Stlnson V. Fernald, 66. 

V. McMnrray, 65. 
Stokes, In re, 154. 
Stowell, In re, 73. 
Stowers, In re, 43. 
Strain v. Gourdin, 134, 198. 
Strang v. Bradner, 96. 
Street v. Dawson, 207. 
Streeter v. Sumner, 264. 
Stucky V. Bank, 200. 
Sturges v. Crowninshield, 272. 
Sullivan v. Rabb, 237. 
Summer v. Richie, 100. 
Sutherland, In re, 113, 224, 256. 
Svenson, In re, 78, 87, 94. 
Swan V. Robinson, 199, 202. 
Sweatt V. Boston, H. & E. R. Co., 

31. 
Sweet, In re, 64. 



Talbot V. Suit, 88. 
Tanner, In re, 56. 
Tappan v. Wliittemore, 69. 
Taylor, Ex parte, 33. 

V. Carryl, 128. 
Temple, In re. 43. 
Terry, In re, 44, 238. 
Thatcher v. Rockwell, 65. 
Thomas, In re, 243. 



Tliomas v. Jones, 89. 
Thomas Scattergood, The, 227. 
Thompson v. Thompson, 198. 
Thornhill v. Bank of Louisiana, 

35, 272. 
Thornton v. Hogan, 117. 
Thorp, In re, 163. 
Thurmond v. Andrews, 89. 
Tiffany v. Lucas, 19. 
TifCt, In re, 9. 
Tinker v. Hurst, 73. 
Tonne, In re, 50. 
Toof V. Martin, 198, 199. 
Townsend, In re, 55, 84^ 
V. Leonard, 130, 260. 
Traders' Bank v. Campbell, 205, 

207. 
Treadwell v. Holloway, 99. 
Trimble v. Woodhead, 2(56. 
Troy Woolen Co., In re, 162. 
Trust Co. V. Sedgwick, 265. 
Trustees of Mut. Bldg. Fund & 

boUar Sav. Bank v. Bossieux, 

155. 
Tua V. Carriere, 272. 
Tubbs V. Williams, 220. 
Tucker v. Oxley, 244. ' 

Tulley. In re, 210. 
Tyler v. Angevine, 68. 



u 

Udall V. School Dist., 266. 
Ulrich, In re, 12, 108. 
Union Pac. R. Co., In re, 19. 
U. S. V. Barnes, 228. 

V. Bayer, 138. 

V. Black, 13S. 

V. Block, 137. 

V. Brawner, 60. 

V. Dewey, 153. 

V. Fisher, 227. 

V. Fox, 268. 

V. Herron, 95. 

V. Hooe, 227. 

V. Houghton. 138. 

V. Jackson, 139. 



CASES CITED. 



29i 



[The figures refer to pages.] 



U. S. V. King, 95. 

V. Mechanics' Bank, 227. 

V. Murphy, 228. 

V. The Rob Roy, 95. 
tJpham V. Loan & Trust Co., 193. 
Upton V. Hansbrough, 15. 
Uyster v. Gaff, 124. 



Valentine, In re, 175. 
Valk, In re, 59. 
Valliquette, In re, 19. 
Vanderhoof v. City Bank, 205. 
Van Nostrand v. Carr, 21, 272. 
Vernia, In re, 83, 84. 
Versellus v. Versellus, 157. 
Vetterlein, In re, 219, 227. 
Viele V. Blanchard, 90. 
Voetter, In re, 246. 
Vogel, In re, 186, 253. 
Voorhies v. Frisbie, 126. 
Voyles V. Parker, 238. 



w 

Wager v. Hall, 198, 203. 
Waite, In re, 195. 
Wald V. Wehl, 55, 100. 
Wales V. Lyon, 89. 
Walker, in re, 59. 

V. Towner, 67. 
Wallace, In re, 12, 116. 

V. McConnell, 128. 
Walther, In re, 175. 
Walton, In re, 175. 
Ward, In re, 213. 
Warder, In re, 257. 
Warne, In re, 82, 83. 
Warner v. Cronkhite, 96. 

V. Spooner, 219. 
Warren v. Bank, 198. 
Washington Marine Ins. Co., In 

re, 128. 
Watson, In re, 13. 

V. Holliday, 224. 



Webb, In re, 46. 

V. Sachs, 206. 
Webster t. Woolbrldge, 238. 
Weeks, In re, 238. 
Wehl V. Wald, 124, 158. 
Weitzel, In re, 27, 28. 
Welge, In re, 210. 
Wells, In re, 76. 

V. Brackett, 139. 
Werner, In re, 251. 
West V. Longis, 272. 
Western Sav. & T. Co., In re, 109. 
Weymouth v. Sanborn, 39. 
Wheeler v. Wheeler, 105. 
Whetmore, In re, 81. 
Whipple, In re, 129, 260. 
Whitaker v. Chapman, 99. 
White, In re, 83. 

V. Piatt, 101. 
Whitehead, In re, 50. 
Whitehouse, In re, 59. 
Whiting, Ex parte, 244. 
Whyte V. McGovern, 64. 
Wicks V. Perkins, 241. 
Wielarski, In re, 26. 
Wiggers, In re, 59. 
Wight y. Muxlow, 191. 
Wiley, In re, 44. 
Wilkinson v. Barnard, 156. 

V. Dobbie, 15. 

V. Wait, 48. 
Williams, In re, 23, 86, 114. 

V. Harkins, 214. 
Willis V. Gushman, 105. 
Wills V. Claflin, 116. 
Wilmot V. Mudge, 74. 
Wilson, In re, 47, 253. 

V. Brinkman, 198. 

V. City Bank, 23, 190. 

V. National Bank, 246. 
Winchester v. Thayer, 27. 
Winn V. Morse, 49. 
Winship, In re, 56. 
Winter v. Railroad Co., 31. 
Winters v. Claitor, 103. 
Wislizenus v. O'Fallon, 104. 
Wisner v. Brown, 160. 
Wiswall V. Campbell, 133. 



292 



CASES CITED. 



[The figures refer to pages.] 



Wofford V. Unger, 218. 
Wolcott Y. Hodge, 101. 
Wolf skill, In re, 82, 86. 
Wood V. Bailey, 134. 
Woodford, In re, 184. 
Woodman v. Btowe, 73. 
Woodward, In re, 33, 122. 

V. Towne, 101. 
Wooldbrldge v. Rickert, 125. 
Woolford, In re, 121. 
Woolridge v. McKeana, 124. 
Woolsey v. Cade, 99. 
Worthington v. De Bardlekin, 

104. 
Wright, In re, 203, 218. 

V. Bank, 259. 

V. Johnson, 157. 

V. Pratt, 50. 



Wronkow, In re, 72. 
Wyllle, In re, 52. 



Yeatmau v^ Savings Inst., 237. 
York, In re, 184, 139. 
Young, In re, 50. 

V. Rldenbaugh, 79. 



Zahm V. Fry, 202. 
Zeiber v. Hill. 251. 
Zeperink v. Card, 99. 
Zimmer v. Schleehauf, 224. 
Zinn, In re, 150. 



INDEX. 



[the figures refer to pages,] 



A 

ABATEMENT, 

death of bankrupt after adjudication does not abate proceed- 
ings, 57. 

death or removal of trustee does not abate pending suits, 153. 
ACCOMMODATION NOTE, 

holder of, entitled to prove against what parties, 215. 

ACCOUNTS, 

to be Iiept by trustees, 154, 155. 

of trustee, open to inspection of parties in interest, 165. 

open, provable in bankruptcy, 212. 

ACTIONS, 

by creditors, may be restrained when, 10. 

may be maintained by banltrupt in respect to exempt property, 

49. 
by and against trustees, 155. 

pending at time of bankruptcy, trustee may become party to, 61. 
not abated by death or removal of trustee, 153. 
to recover property conveyed in fraud of creditors, 265. 
to set aside fraudulent conveyances, state court has no jurisdic- 
tion of, 125, 126. 
trustee's right of action to recover assets is exclusive, 266. 
by and against trustees, limitation of, 61, 67. 
by trustee to recover preference, burden of proof in, 205. 
against bankrupt to be stayed when, 61. 

ACTS OF BANKRUPTCY, 
enumerated and defined, 16. 
assignment for creditors, 16, 20. 
giving a preference, 16, 21. 
concealing property, 10, 23. 
BL. BANK. (298) 



294 INDEX. 

[The figures refer to pages.] 

A€TS OF BANKRUPTCY— Continued, 
insolvency of debtor essential to, 18. 
fraudulent conveyances, 19. 
filing of petition in voluntary banliruptcy, 24. 
who can commit, 25. 
by partnership, 40, 44. 
by corporation, 24. 

AD.TUDICATION, 

meaning of term as used in act, 1. 

jurisdiction of bankruptcy court to make, 5. 

in voluntary proceedings, 106. 

in involuntary proceedings, 106. 

who may oppose, 106. 

is in rem and conclusive, 116. 

of one partner dissolves the firm, 44. 

AFFIRMATION, 

the word "oath" includes, 3. 

AFTER-ACQUIRED PROPERTY, 

property acquired by bankrupt after adjudication does not pass 
to trustee, 263. 

AGENT, 

in what cases agents are fiduciary debtors, 99. 
assisting in proof of false claim, liable to penalty, 136. 

AGRICULTURISTS, 

not subject to involuntary bankruptcy, 25. 

ALIEN, 

may petition in voluntary bankruptcy, 25, 35. 

ALLOWANCE, 

of claims proved and filed, 172. 

of expenses of administering estates, 209. 

AMENDMENT, 

of petition in bankruptcy. 111. 
of proof of claim, 177. 

ANSWER, 

of debtor to involuntary petition, 112. 



INDEX. 295 

[The figures refer to pages.] 

APPEALS, 

appellate jurisdiction conferred and regulated, 131, 132. 

supervisory power of circuit courts of appeals, 131. 

may be taken from what judgments in bankruptcy eases, 131. 

to United States supreme court, when allowed, 131, 132. 

trustees not required to give bonds on, 132. 

certifying controversies to United States supreme court, 132. 

upon writ of error, 133. 

practice on appeal, 134. 

from rejection of claims, 180. 

APPELLATE COURTS, 

meaning of term as used in act, 1. 

APPOINTMENT, 
of referees, 141. 

persons holding ofiBces of trust or emolument not eligible, 141. 

relatives of judges not eligible, 141, 142. 
of trustees, 149. 

APPRAISAL, 

of property of estate in bankruptcy, 250. 

ARBITRATION, 

trustee may submit controversies to, when, 134. 

ARREST, 
■ of bankrupt, may be ordered when, 58. 
is designed merely to secure attendance of bankrupt, 58, 60. 
bankrupt not liable to, in civil actions, 58. 

ASSETS, 

defined, 341. 

marshaling of, by bankruptcy court, 11. 

omission of, from schedule, when a bar to discharge, 81. 

may be sued for in what courts, 123. 

ASSIGNMENT, 

for benefit of creditors, an act of bankruptcy, 16, 20. 

although defectively executed, 20. 
when amounts to fraudulent preference, 189. 
when dissolved by adjudication in bankruptcy, 233. 
assignee for creditors cannot hold property against ^bsequently 
appointed trustee in bankruptcy, 259, 260. 



296 INDEX. 

[The figures refer to pages.] 

ASSOCIATIONS, 

unincorporated, subject to bankruptcy law, 25. 

ATTACHMENT, 

when dissolved by adjudication in banliruptcy, 233. 

ATTORNEY, 

of creditor, or of banltrupt, may be trustee, 150. 

of claimant, may verify proof of claim, when, 176. 

knowledge of. as to debtor's insolvency, when imputable to 

creditor, 201. 
in what cases he Is a fiduciary debtor, 101. 
assisting in proof of false claim, liable to penalty, 136, 137. 
fees of, to have priority of payment, 225. 

ATTORNEY GENERAL, 

to prepare statistics of bankruptcy, 168. 

AUCTIONEER, 

acts in a fiduciary capacity, 103. 

B 

BAIL, 

may be given by bankrupt arrested on warrant, .58. 
cannot be required of arrested bankrupt for any other purpose 
than to secure his attendance, 60. 

BAILMENT,. 

in what cases bailees are fiduciary debtors, 99. 
BANKRUPT, 

meaning of term as used In act, 1. 

who may become, 25. 

duties of, 53. 

to file schedule and list of creditors, 53. 

service of subpoena and petition on, 106. 

death of, after adjudication not to abate proceediTigs, 57. 

plea or answer to petition, 112. 

may make oath to his solvency; practice thereon, 16. 

is civlliter mortuus during proceedings in bankruptcy, 252. 

has charge of his property before appointment of trustee, 253. 
may bring suits for its protection, 253. 

entitled to exemptions, 48. 



INDEX. 297 

[The figures refer to pages.] 

BANKRUPT— Continued. 

may maintain suits in respect to exempt property, 49. 

may mortgage or pledge exempt property, 51. 

to execute necessary deeds, 53. 

to attend first meeting of creditors, 53. 

may be examined as to his affairs, 53. 

protected from arrest in civil actions, 58. 

arrest and extradition of, 58, 60. 

proposal for composition by, 69. 

criminal offenses by, 136. 

BANKRUPTCy ACT, 

who may have advantage of, 25. 

to take effect when, 267. 

constitutionality of, 267. 

effect of, on proceedings under state insolvent laws, 271, 

BANKS, 

not subject to provisions of bankruptcy act, 34. 
depositories for money of estates, 208. 

BOND, 

on appeal or writ of error, 132. 

of referees, 165. 

of petitioning creditor for warrant of arrest, 16, 

for warrant to seize property, 248. 
for release of property seized under warrant, 248. 
of trustees, 165. 

joint trustees may give joint and several bonds, 166. 
trustee to give separate bond for each estate, 167. 
of designated depositories, 208. 

BOOKS AND PAPERS, 

relating to bankrupt's property, belong to trustee, 249. 
failure to keep books of account as bar to discharge, 77, 83. 
what are proper books of account, 83. 

BURDEN OF PROOF, 
see "Evidence." 

BUSINESS OF BANKRUPT, 

may be carried on by authority of court, 5. 



298 INDEX. 

[The figures refer to pages.] 

c 

CHOSES IN ACTION, 

belonging to bankrupt, vest in trustee, 257. 

CIRCUIT COURTS, 

jurisdiction of suits by and against trustees, 123. 
of criminal proceedings under bankruptcy act, 123. 

CIRCUIT COURTS OF APPEALS, 

appellate jurisdiction of, in bankruptcy, 131. 

general superintendence and jurisdiction of, 131. 

final judgment of, when reviewable by U. S. Supreme court, 
131, 132. 

appeal and writ of error to, from district court, 133. 
CLAIJIS, 

see "Debts." 
CLERK, 

of bankrupt, entitled to priority of payment, 225. 

CLERKS OF COURTS, 

duties of, in bankruptcy cases, 167. 
fees of, 168. 

C0M3IENCEMBNT OP PROCEEDINGS, 
filing of petition to be deemed the, 1. 

COMPOSITIONS, 

confirmed or rejected by court, 5. 

banlfrupt may file proposal for, 69. 

when application for confirmation of, may be made, 69. 

hearing on proposal for, 69. 

notice of hearing on, 181. 

assent of creditors, proportion required, 69. 

creditors must prove debts before their assent can be counted, 69. 

rights of secured creditors, 72. 

confirmation of proposal, 70. 

■what matters may be considered as to expediency of accepting 

proposal, 70. 
money to be deposited under direction of judge, 70. 
payment to creditors, 69. 
discharge of debtor, 74, 77. 
debtor's property to revert, 75, 251. 



INDEX. 299 

[The figures refer to pages.] 

COMPOSITIONS— Continued. 

proceedings in, are vitiated by fraud, 73. 
this clause constitutional, 70. 
setting aside for fraud, 76. 

COMPROMISES, 

trustee may make, with approval of court, 135. 
proposed, creditors to have notice of, 181. 

COMPUTATION OF TIME, 
rule for, under this act, 139. 

CONCEALMENT, 

includes secreting, falsifying, and mutilating, 3. 
of property, when an act of bankruptcy, 16, 23. 
of property, with intent to defraud, made criminal, 136. 

CONIflR.MATION, 
of trustee, 151. 

CONFLICT OF LAWS, 

law of debtor's domicile governs exemptions, 52. 

statute of limitations of debtor's domicile controls proof of debts, 

217. 
effect of bankruptcy act o/ state Insolvency laws, 271. 

CONSPIRACY, 

of other persons with bankrupt to commit acts made criminal 
by the statute, 137, 138. 

CONSTITUTIONAL LAW, 

constitutionality of national bankruptcy law, 267. 
of clause relating to exemptions, 268. 
of clause relating to compositions, 70. 

CONSTRUCTION, 

of words and phrases, see "Definitions." 
of bankruptcy law, rules for, 274. 

CONTEMPT, 

bankruptcy court may compel obedience by process of, 5. 
before referees, punishable by court, 5, 147. 

CONTINGENT DEBTS, 

how and when provable, 221. 
what Is meant by, 221. 



300 INDEX. 

[The figures refer to pages.] 

CONTRACTS, 

claims founded on, provable In bankruptcy, 212. 
executory, of bankrupt, do not generally vest In trustee, 263. 

CONVEYANCES, 

fraudulent, as acts of bankruptcy, 16, 19. 
bankrupt to execute all necessary, 53. 

COPYRIGHTS, 

bankrupt's interest in, vests in trustee, 249. 

CORPORATIONS, 

■what included in term, as used in act, 2. 

included in term "persons," 1. 

bankrupt act applies to certain, 25. 

cannot file voluntary petition, 25. 

certain provisions of the act apply to officers of, 3. 

jurisdiction in bankruptcy over, 14. 

acts of bankruptcy by, 24. 

subscriptions to stock of, may be called by court, 15. 

COSTS, 

povrer of bankruptcy court over, 5. 

taxable, are provable claims in bankruptcy, 212. 

of bankruptcy proceedings to have priority, 225. 

COUNSEL FEES, 

in involuntary proceedings, allovred vrhen, 225. 

COUNTERCLAIM, 

when allowed in favor of bankrupt's debtor, 243. 

COURTS OP BANKRUPTCY, 

meaning of term as used in act, 1. 

see, also, "Circuit Courts," "District Courts," "District of 
Columbia," "State Courts," "Supreme Court," "Territorial 
Courts." 

COVENANTS, 

claims for breaches of, are provable debts, 214. 
CREDITORS, 

who are, within meaning of act, 2. 

may be restrained from prosecuting actions against bankrupt, 
10. 

entitled to notice of various proceedings, 181. 



INDEX. 301 

[The figures refer to pages.] 

CREDITORS— Continued. 

number and amount of, who must join in petition, 182. 
how computed, 182. 

secured, may Join, when, 183. 

attaching, not to be reckoned, 183. 

fraudulently preferred, cannot join in petition. 183 

a single creditor may petition, 184. 

number and amount of, a jurisdictional fact, 185. 

joining in petition cannot withdraw, 115, 186. 

who may intervene, 18(5. 

who may defend, 115. 

to choose trustee at first meeting, 149. 

proportion of, required to elect trustee, 149. 

preferred or secured, not to vote, 149. 

may vote by proxy, 149. 

preferred, cannot prove debts until surrender or recovery of 
preference, 173. 

secured, rights of, 240. 

rights of, in compositions, 70. 

what proportion of, required to ratify acceptance of composi- 
tion, 69. 

must prove debts before their assent to composition can be 
counted, 70. 

penalties against, for proving false claims, 136, 137. 
CRIMES UNDER THE ACT, 

to constitute valid objection to bankrupt's discharge, 77. 

concurrent Jurisdiction of circuit and district courts as to, 123. 

criminal acts and omissions by banlirupt, 136, 137. 

what acts of creditors to be misdemeanors, 136. 
penalties, 136, 137. 
perjury, 136. 

embezzlement by trustee; punishment, 136. 

crimes by referees, 137. 

pleading and practice, 137. 

conspiracy of other persons with bankrupt to defraud, 138. 



302 INDEX. 

[The figures refer to pages.] 

D 

DAMAGES, 

unliquidated, constitute provable debts, 212. 

DATE OF BANKRUPTCY, 

time of filing petition to be talcen as, 1. 

DEATH, 

of bankrupt, not to abate proceedings, .57. 
of trustee, not to abate pending suits, 153. 

DEBTS, 

meaning of term as used in act, 2. 

amount required to authorize proceedings, 25. 

may be allowed at first meeting of creditors, 170. 

privileged or secured, not entitled to vote, 171. 

proof and allowance of, 172. 

what debts are provable, 212. 

unliquidated claims, how proved, 212. 

barred by limitations, not provable, 217. 

preferred creditors cannot prove until surrender, 173. 

rights of secured creditors, 240. 

what claims have priority, 225. 

what debts released by discharge, !>5. 

certain debts not affected by discharge, 95. 

new promise to revive debts barred by discharge, 103. 

mutual, set-off of, 248. 

penalties for proving false claims, 136. 

DECEDENT'S ESTATE, 

proceedings in bankruptcy cannot be instituted against, 35. 

DECKEE, 

in bankruptcy, is in rem and conclusive, 116. 
not impeachable except tor fraud, 117. 
conclusive as to jurisdiction, 117. 

DEED OF TRUST, 

when a fraudulent preference, 189. 
DEEDS, 

relating to bankrupt's property pass to trustee, 249. 

bankrupt to execute all necessary, 53. 

trustee to execute, on sales of bankrupt's realty, 250. 



INDEX. 303 

[The figures refer to pages.] 

DEFENSES, 

to petition in bankruptcy, what allowed, 113. 

DEFINITIONS, 
adjudication, 1. 
appellate courts, 1. 
bankrupt, 1. 

commencement of proceedings, 2. 
conceal, 3. 

contemplation of bankruptcy, 86. 
corporations, 2. 
courts of bankruptcy, 2. 
creditor, 2. 

date of bankruptcy, 2. 
debt, 2. 
discharge, 2. 
document, 2. 
holiday, 2. 
Insolvent, 2. 
judge, 3. 
oath, 3. 
officer, 3. 
persons, 3. 
petition, 3. 
referee, 3. 
secured creditor, 3. 
states, 4. 
transfer, 4. 
trustee, 4. 
wage-earner, 4. 

DEPOSIT OP MONEY, 
trustee to make, 163. 
court to designate depositories, 208. 

DEPOSITIONS, 

taking of, in bankruptcy proceedings, 120. 

DISCHARGE OF BANKRUPT, 

meaning of term as used in act, 2. 

when application for, to be made, 77, 78. 

hearing on application for, to be held by judge, 77. 



304 INDEX. 

[The figures refer to pages.] 

DISCHARGE OF BANKRUPT— Continued. 

notice to creditors of application for, 79, ISl. 

essentials to validity of, 79. 

what shall constitute valid objections to, 77. 

parties in interest may oppose, 77. 

discharge, when to be granted, 77. 

certificate to be conclusive evidence of discharge, 121. 

what debts released by, 95. 

what debts not affected by, 95. 

effect of, on creditors without notice, 95. 

not to release persons Jointly liable with bankrupt, 94. 

validity of, dependent on jurisdiction, 79. 

grounds for refusing, discussed, 81. 

who may oppose, 79. 

pleading and practice on opposition to, 80. 

debts created by fraud or embezzlement not released by, 95. 

fiduciary debts not affected by, 98. 

order granting, may be reviewed and annulled, when, 91. 

new promise to revive debt barred by, 104. 

cases in which discharge will be revoked, 91. 

conclusiveness of, 88. 

not collaterally impeachable, 89. 

must be specially pleaded, 90. 

in case of second bankruptcy, 90. 

in composition proceedings, 77. 
DISMISSAL OF PETITION, 

in involuntary bankruptcy, 115. 

for want of prosecution, 182. 

DISMISSAL, OF PROCEEDINGS, 

proposed, creditors must be notified of, 181. 
DISTRIBUTION OF ESTATE, 

in partnership cases, 40, 44. 

in compositions, 69, 70. 

see, also, "Creditors," "Dividends," "Priorities." 
DISTRICT COURTS, 

constituted courts of bankruptcy, 5. 

nature and extent of jurisdiction, 5-8. 

powers are statutory, 8. 

are not inferior tribunals, 8, 9. 

ancillary jurisdiction of, 9. 



INDEX. 305 

[The figures refer to pages.] 

DISTRICT COURTS— Continued, 
power to restrain state courts, 10. 
summary jurisdiction of, 11. 

jurisdiction as dependent on residence of debtor, 13. 
jurisdiction of corporations, 14. 
appointment of receiver by, 5, 14. 
power to call in stock subscriptions, 15. 

may restrain creditors from prosecuting actions to final judg- 
ment, 10. 

DISTRICT JUDGE, 

to appoint referees, 141. 

may appoint receiver, 5. 

to preside at first meeting of creditors. 170. 

appointment and removal of trustees by. 140, 1.53. 

DISTRICT OF COLUMBIA, 

supreme court of, constituted a court of bankruptcy, 5. 

DIVIDENDS, 

creditors to have notice of, ISl. 

shall be ordered by the court, when, 230. 

already declared, not to be disturbed by debts subsequently 

proved, 230. 
referee to prepare dividend sheet, 145. 
rmclaimed for six months, to be paid into court, 231. 
unclaimed for one year, how distributed, 231. 
order for, will be restrained when, 231. 
ordered but not paid, are not attachable, 231. 

DOCUMENTS, 

meaning of term as used in act, 2. 

relating to bankrupt's property, trustee entitled to, 249. 

DOMICILE, 

jurisdiction as depending on, 5, 13. 

DOWER, 

of bankrupt's wife not divested by trustee's sale, 160. 

DRAWER OF BILLS, 

bankrupt's liability as, a provable debt, 215. 
BL. BANK.— 20 



306 INDEX. 

[The figures refer to pages.] 



E 

ELECTION, 

of trustee, how conducted, 149. 

EMBEZZLEMENT, 

debts created by, not released by discharge, 95, 90. 

meaning of, 97. 

by trustee, penalty for, 136. 

EMPLOYES, 

of bankrupt, not counted in computing number of creditors 

who must join in petition, 183. 
wages of, have priority, 225. 

EQUITABLE DEMANDS, 

provable in banljruptcy, 213. 

EQUITY OB"' REDEMPTION, 

in property mortgaged by bankrupt, vests in trustee, 254. 

EVIDENCE, 

in bankruptcy, statutory rules of, 120. 

taken at examinations, to be reported in substance by referee, 

145. 
payments after petition filed are material facts at trial, 114. 
burden of proof is on petitioning creditors, 114. 
decree in bankruptcy is in rem and conclusive, 116. 
examination of witnesses, 120. 
taking of depositions, 120. 
copy of order approving trustee's bond to be evidence of his 

powers and rights, 121. 
burden of proof in action to recover preference, 203. 
state courts take judicial notice of bankruptcy law, 274. 

EXAMINATIONS, 

of witnesses ordered by court, 120. 
referee to report substance of evidence, 145. 
stenographer may be employed, 144. 
bankrupt may be examined, 54, 56. 
wife of bankrupt may be examined, 121. 
witnesses may be summoned, 120. 
creditors to have notice of, ISl. 



INDEX. 307 

[The figures refer to pages.] 

EXECUTORS AND ADMINISTRATORS, 

in what eases are to be regarded as fiduciary debtors, 102. 

EXEMPTIONS, 

allowed to bankrupt, 48. 

trustee acauires no title to, 48. 

pai-tners not entitled to individual, out of firm property, 51. 

preservation of liens on, 50. 

forfeiture or waiver of, 51. 

bankrupt's claim to, determined by court, 6. 

governed by law of debtor's domicile, 52. 

clauses relating to, are constitutional, 268. 

EXPENSES, 

of administering estates, allowance of, 210. 
to have priority, 225. 

EXTRADITION OP BANKRUPT, 

jurisdiction of bankruptcy court as to, 7. 
when ordered, 60. 

F 

FACTORS, 

whether they are fiduciaries, 98. 

FALSE PRETENCES, 

judgments in actions for, not released by discharge, 95. 

FARMERS, 

not subject to involuntary bankruptcy, 25. 

FEDERAL COURTS, 

jurisdiction of, exclusive for certain purposes, 134. 

FEES. 

of referees, 146. 

of trustees, 164. 

of clerks of courts, 168. 

of marshals, 168. 

to have priority of payment, 225. 

FICTITIOUS DEBTS, 

bankrupt to disclose linowledge of proof of, 53. 
proof of, by creditor, penalty for, 136. 



308 ' INDEX. 

[The figures refer to pages,] 

FIDUCIARY DEBTS, 

not released hy discharge, 95. 
who are fiduciary debtors, 98. 

FOREIGN ADJUDICATIONS, 

rights of domestic creditors in ease of. 230. ' 

FORFEITURES, 

proof and allowance of claims for, 172. 

FORMS, 

to be prescribed by United States supreme court, 139. 

FRANCHISE, 

owned by bankrupt passes to trustee, 256. 

FRAUD, 

of creditor, bars proof of claim, 220. 

debt created by bankrupt's, not released by discharge, 95. 

judgment in action for, not released by discharge, 95. 

as ground for annulling discharge, 91. 

will vitiate composition, when, 73. 

FRAUDS ON THE ACT, 
see "Preference." 

FRAUDULENT CONVEYANCES, 
as acts of bankruptcy, 16, 19. 
property conveyed by bankrupt in fraud of creditors vests In 

trustee, 249. 
trustee may avoid any transfer which judgment creditors could, 

251. 
actions by trustee to set aside, 265. 

state courts have no jurisdiction of, 126. 
trustee may recover property conveyed in fraud of the act, 188. 
when constitute bar to discharge of bankrupt, 82. 
dissolved by adjudication in bankruptcy, 233. 
when made criminal, 136. 

FUNDS, 

of estate, to be deposited by trustee, 163. 
court to designate depositories for, 208. 



INDEX. '309 

[The figures refer to pages.] 

G 

GARXISHMENT, 

of debtor's propferty, when dissolved by adjudication in banlv- 
ruptoj',' 233. 

dividends ordered but not paid are not subject to, ,231. 
GUARANTY, 

bankrupt's liability on contract of, a provable debt, 215. 

guarantor of bankrupt, paying debt, may' prove claim, 172. 
entitled to subrogation, 173. 

of third party is not a security within the act, 242. 

guarantor of bankrupt not released by latter's discharge, 94. 

H 

HEARINGS, 

see "Examinations." 

HOLIDAYS, 

what excluded In computation of time, 2. 
HOMESTEAD, 

exempt to bankrupt, 49. 

I 

INCUMBRANCES, 

see "Liens." 

INDORSEMENT, 

of bankrupt's note, not a security within the act. 242. 

INDORSER, 

bankrupt's liability as, a provable debt, 216. 

of bankrupt's paper not released by latter's discharge, 94. 

INFANT, 

cannot be adjudged a bankrupt, 26. 
time allowed to, for proof of claims, 174. 

INJUNCTION, 

to restrain creditors from prosecuting actions in state courts, 

10. 
will not issue from state court to prevent filing of petition in 

voluntary bankruptcy, 26. 



310 INDEX. 

[The figures refer to pages.] 

INSANITY, 

of bankrupt, not to abate proceedings, 57. 

INSOLVENCY, 

meaning of, as used in bankruptcy law, 2. 
essential to commission of act of bankruptcy, 16, 18. 
denial of, by debtor, proceedings thereon, 17. 

INSOLVENCY LAWS, 

proceedings under, how affected by bankruptcy act, 271. 

INSURANCE COMPANIES, 

whether subject to bankruptcy laws, 31. 
INTEREST, 

constitutes part of provable debt, 212, 216. 

accruing after adjudication, not provable, 216. 

INVENTORY OF ESTATE, 

bankrupt to make and file, 53. 

INVOLUNTARY BANKRUPTCY, 
what is an act of bankruptcy, 16. 
who are subject to, 25. 

number and amount of creditors who must Join In petition, 182. 
petition to be filed within four months after act of bankruptcy, 

16. 
proceedings when bankrupt alleges his solvency, 17. 
citation to debtor to show cause against petition, 106. 
adjudication in, 106. 

J 

JOINT-STOCK COMPANIES, 

when subject to bankruptcy law, 2, 25. 
JUDGE, 

see "District Judge." 
JUDGMENTS, 

lien of, when dissolved by adjudication in bankruptcy, 233. 

as provable claims in bankruptcy, 212, 214. 

for torts, are provable debts, 224. 

procured by debtor against himself, when amount to fraud- 
lent preferences, 22, 187. 

on provable debts, are released by discharge, 95. 

In actions for fraud or tort, not affected by discharge, 95. 



INDEX. 311 

[The figures refer to pages.] 

JUDICIAL NOTICE, 

state courts -will take, of national bankruptcy law, 274. 

JURISDICTION, 

of bankruptcy courts, defined and regulated, 5. 

nature and extent of, 7. 

ancillary, 9. 
summary, of district court, 11. 
power to restrain state courts, 10. 
as depending on residence, 5, 13. 
objections to, when to be made, 108. 

number and amount of creditors joining in petition a jurisdic- 
tional fact, 185. 
actual notice to creditors not essential to, 117. 
decree in bankruptcy conclusive as to, 117. 
of trustee's suit to recover assets, 123. 
of federal and state courts, conflicting, 128. 
of federal courts, exclusive in certain cases, 124. 
nom-esident creditor subjects himself to, by proving debt, 176. 
validity of discharge depends upon, 79. 
in bankruptcy of partnership, 41. 

JURY TRIAL, 

debtor may demana, 118. 
shall be had, when, 118. 
demand for, must be made when, 118. 

L 

LABOR CLAIMS, 

to have priority of payment, 225. 

LACHES, 

of creditor bars proof of claim, 220. 

LEASES, 

damages for rejection of, by trustee, provable debt, 222. 

LEVY, 

upon debtor's property within four months before bankruptcy 
dissolved by adjudication, 233. 

LICENSE, 

owned by bankrupt, when passes to trustee, 256. 



ill 2 INDEX. 

[The figures refer to pages.] 

LIENS, 

void for want of record, do not bind estate in trustee's hands, 

233. 
arising upon legal process, when dissolved by adjudication in 

banliruptcy, 233. 
trustee talies subject to all lawful, 234. 
created by statute, preserved in bankruptcy, 239. 
banlirupt's property may be sold free from, 161. 
LIMITATION OF ACTIONS, 

time within which involuntary petition must be filed, 16. 

by and against trustees, 61, 67. 

debts barred by statute of, not provable, 217. 

institution of baniiruptcy proceedings stops running of statute, 

217. 
new promise to revive debt barred by discharge, 104. 
LIMITED PARTNERSHIPS, 

when subject to banliruptcy law, 2, 25. 
LIST OF CREDITORS, 

bankrupt to prepare and file, 53. 
LUNATIC, 

cannot commit an act of bankruptcy, 27. 

but may be proceeded against for acts committed while 
sane, 27. 
time allowed to, tor proof of claims, 174. 

M 

MA.JORITY. 

of creditors, what shall constitute, 171. 
MALICIOUS PROSECUTION, 

in bankruptcy, creditor liable in damages for, 118. 
MANUFACTURING CORPORATIONS, 

are subject to bankruptcy law, 2.">. 

what are, 33. 
MARRIED WOMEN, 

may be adjudged bankrupts, when, 23. 
MARSHAL, 

to execute warrant of arrest, 58. 

warrant to, for seizure of property, 248. 



INDEX. 1513 

[The figures refer to pages.] 

MARSHAL— Continued. 

seizing goods of stranger on' warrant of seizure, Is liable as 

trespasser, 248. 
fees of, in bankruptcy proceedings, 168. 

MARSHALLING ASSETS, 

by court of bankruptcy, 11. 

MASTER AND SERVANT, 

liability of trustee for torts of employSs, 159. 
wages of labor entitled to priority of payment, 225. 

MECHANICS' LIENS, 

when not impaired by proceedings in bankruptcy, 240. 

MEETINGS OF CREDITORS, 

notice to creditors of first meeting, 181. 

first meeting held when, 170. 

place of meeting, 170. 

proceedings at first meeting, 170. 

qualifications of voters, 171. 

majority in number and amount to govern, 171. 

right of secured creditor to vote, 171. 

bankrupt to attend first meeting, 53, 55. 

further meetings, when called, 170. 

final meeting, when ordered, 170. 

MERCANTILE CORPORATIONS, 
subject to bankruptcy law, 25, 
what are, 33. 

MONEYS, 

see "Funds." 

MORTGAGES, 

foreclosure of, not decreed summarily, 12. 

equity of redemption in property mortgaged by bankrupt vests 

in trustee, 254. 
made in good faith, preserved in bankruptcy, 234. 
of exempt property are not preferences, 51. 
are securities within the meaning of the act, 241. 
foreclosure of, may be stayed by bankruptcy court, 62. 

MUTUAL DEBTS, 
see "Set-OfC." 



314 INDEX. 

[The figures refer to pages.] 

N 

NATIONAL BANKS, 

not subject to bankruptcy law, 25, 34. 
NEGLIGENCE, 

of employes, liability of trustee for, 159. 
NEW PROMISE, 

to revive debt barred by discharge, 103. 

NEWSPAPERS, 

to be designated by court for publication of notices and orders, 
136. 
NOTARY PUBLIC. 

may administer oaths required by the act, 119. 
NOTICE, 

to creditors, on what occasions to be given, 181, 

to debtor, to show cause against petition, 106. 

may be made by publication, when, 106. 

actual, to creditors not essential to jurisdiction, 116. 

of tailing depositions, 120. 

of public sales by trustee, 181. 

of meetings of creditors, 181. 

of hearing on trustee's accounts, 181. 

of hearing on application for discharge, 79. 

of hearing on proposal for composition, 181. 



OATHS, 

Include affirmations, 3. 

who may administer, 119. 
OFFICERS, 

meaning of term as used in act, 3. 

P 

PARTIES TO ACTIONS, 

additional, may be brought in by order of court, 6. 
trustee's right of intervention in pending suits, 61. 
PARTNERS, 

transfers of interests between, may amount to preference, 195. 



INDEX. 31.5 

[The figures refer to pages.] 

PARTNERSHIP, 

when included in term "persons," 3. 

partners not entitled to Individual exemptions out of firm prop- 
erty, 50. 

proceedings In bankruptcy of, 40. 

one or more of the partners may be adjudged, 40, 41. 

petition against, where to be brought, 42. 

notice to be served on members not petitioning, 41. 

jurisdiction follows petition fii-st filed, 42. 

what creditors may prove against, 42. 

trustee of, how chosen, 40. 

trustee to keep separate accounts of joint and separate estate. 
40. 

rules for distribution of estate, 40, 44. 

certificate of discharge, efCect of, 47. 

proceedings in case of indebtedness of partner to firm or vice 
versa, 40. 

dissolution of firm does not save it from operation of bank- 
ruptcy act, 40, 43. 

secret and dormant partners, 43. 

adjudication of one member dissolves the firm, 44. 

PATENTS AND PATENT-RIGHTS, 

bankrupt's interest in, vests in trustee, 249. 

PENALTIES, 

for crimes under the act, 136. 

claims for, proof and allowance of, 172. 

PERJURY, 

under the act, a criminal offense, 136. 

"PERSONS," 

includes corporations, partnerships, and women, 3. 

PETITION, 

meaning of term as used in act, 3. 

In bankruptcy, filing and service of, 106. 

what must contain, 108. 

In voluntary bankruptcy, may be withdrawn or dismissed when, 

25. 
filhig of, in voluntary proceedings, to be deemed an act of 

bankruptcy, 24. 



316 INDEX. 

[The figures refer to pages.] 

PETITION— Continued. i 

filing and presentation of, 110. 

number and amount of creditors who must join, 182. 
to be brought within four months after act of banlcruptcy, 16. 
appearance and plea to, 106. 
hearing upon, may be stayed when, 182. 
who may petition, 182. 
number and amount of creditors joining a jurisdictional fact, 

185. 
creditors joining cannot withdraw, 115, 186. 
who may intervene In, 186. 
who may be admitted to defend, 115. 
dismissed, when, 115. 

allegations to be certain and detailed, 108. 
how verified, 109. 
amendments to. 111. 

PLEADING, 

in opposition to petition, 106. 

to be verified, 106. 

allegations of petition must be certain and detailed, 108. 

amendment of petition relates back to filing. 111. 

amendments, when allowed. 111. 

debtor's plea or answer to petition, 112. 

plea of tender not admissible, 113. 

payments after petition, 113. 

formal requisites of proof of debt, 172, 174. 

discharge in bankruptcy must be specially pleaded, 90. 
POWERS, 

exercisable by bankrupt for his own benefit pass to trustee, 249. 
PRACTICE, 

in bankruptcy, regulated, 106. 

rules of, to be prescribed by supreme court, 139. 

In compulsory proceedings, 106. 

Intervention of creditors and opposition by them, 186. 

dismissal of petition, 182. 

amendments to petition. 111. 

trustee's right of Intervention in pending suits, 61. 

death or removal of trustee not to abate pending suits, I.jS. 

limitation of actions by and against trustees, 61, 67. 



INDEX. 317 

[The figures refer to pages.] 

PRACTICE— Continued. 

proof and allowance of claims, 172. 

witlidrawal and amendment of proof of claim, 177. 

postponement of proof of claim, 177. 

In composition proceedings, 69. 
PREFERENCE, 

fraudulent, an act of bankruptcy, 16, 21. 

must be surrendered, or creditor cannot prove or vote, 172. 

mortgage or pledge of exempt property not a, .51. 

defined, 187. 

may be avoided by trustee and property recovered, 187, 206. 

assignments for creditors, 189. 

procuring or suffering judgment, 189. 

exchange of securities, 192. 

cumulative securities, 193. 

advances in good faith upon security, 194, 195. 

transfers between partners, 195. 

miscellaneous examples of, 195. 

pressure, solicitation, or threats of creditor do not alter the 
case, 197, 198. 

what is reasonable cause of belief for creditor, 199. 

intention of debtor, 204. 

when constitutes objection to bankrupt's discharge, 81. 

PREFERRED CREDITOR, 

who to be deemed a, 189, 190. 

not entitled to prove debt or vote until surrender of preference. 
173. 
PRIORITY, 

certain debts entitled to, 225. 

taxes, 225. 

costs and charges of proceedings, 225. 

attorney's fee, 225. 

wages of labor and clerk hire, 225. 

debts due the United States. 226. 

debts due a state, 228. 

debts due a person entitled to priority, 225. 

privileged debts may be ordered paid wlien, 225. 

debts entitled to, must be paid in cash in composition proceed- 
ings, 69. 



318 INDEX. 

[The figures refer to pages.] 

PRIVILEGED COMMUNICATIONS, 

bankrupt's wife not required to disclose, 121. 

PROCEEDING IN BANKRUPTCY, 
is in rem, 8. 
when dismissed, 115, 182. 

PROCESS, 

in involuntary banljruptcy, service of, 106. 

PROCURING OR SUFFERING JUDGMENT, 

with intent to defraud, an act of bankruptcy, 16. 
when amounts to fraudulent preference, 187. 
contributive action on part of debtor necessary to, 187. 

PROOF OF CLAIMS, 
how made, 172. 
statement to be verified, 172. 

what to contain, 172. 
claims founded on written instruments, 172. 
filing of proved claims, 172. 
allowance of claims, 172. 
claims of secured and prior creditors, 172. 
objections to claims, how heard and determined, 173. 
preferred creditor cannot prove without surrender of prefer- 
ence, 173, 178. 
claims of secured creditors, how liquidated, 173. 
proof by person secondarily liable for bankrupt, 173. 

subrogation to rights of creditor, 173. 
claims for penalties or forfeitures, 173, 174. 
reconsideration of claims which have been allowed, 174. 
one bankrupt estate may prove against another, 174. 
limitation of time for proving claims, 174. 

saving of rights of infants and lunatics, 174. 
formal requisites of proof of claims, 174. 
withdrawal and amendment of proofs, 177. 
postponement of proofs, 177. 
power to expunge proofs, 179. 
appeal from rejection of claims, 180. 

PROPERTY, 

of bankrupt, may be seized on warrant, 18, 248. 
vests in trustee, 249. 



INDEX. 3 1 'J 

[The figures refer to pages.] 

I'ROPERTY-Oontinued. 

conveyed in fraud of creditors, laelongs to trustee, 250. 

acquired by bankrupt after adjudication does not pass to trus- 
tee, 263. 

trustee need not talie property whicli may be onerous to estate, 
264. 

certain property of banljrupt to be exempt, 48. 

concealment or removal of, an act of bankruptcy, 16. 

PROVABLE DEBTS, 
see "Debts." 

PUBLICATION, 

of petition and subpcena, 106. 
of notices to creditors, 181. 

PUBLIC OFFICER, 

debt created by bankrupt's defalcation while acting as a, not 
affected by discharge, 101. 

R 

RAILROADS, 

not subject to provisions of bankruptcy act, 30. 

REAL ESTATE, 

of bankrupt, title to, vests in trustee, 254. 

RECEIVER, 

appointment of, by bankruptcy court, 5, 14. 

cases in which he should be appointed, 14. 

appointed by state court, entitled to hold possession against 

subsequently appointed trustee, 260. 
may be authorized to carry on bankrupt's business, 6. 

RECORDS, 

of referee, 148. 

REFEREES IN BANKRUPTCY, 
office of, created, 141. 
by whom appointed, 141. 
number of, 141, 143. 
qualifications of, 141. 
territorial jurisdiction of, 141. 
may be removed from office by district judge. 1-tl. 



320 INDEX. 

[The figures refer to pages.] 

REFEREES IN BANKRUPTCY— Continued, 
official oath of, 142. 
to give bonds, 163. 
jurisdiction and powers of, 143. 
may represent and act for judge when. 143. 
acts of, subject to review by judge, 143. 
duties of, 145. 
compensation of, 146. 
contempts before, 147. 
records of, 148. 

may administer oaths, 119, 143. 
may issue warrants of ari-est or spizure in illness or absence of 

judge, 143. 
to report substance of evidence talien at examinations, 145. 
effect of absence or disability of, 148. 
duties of, at first meeting of creditors, 170. 
to prepare dividend sheet, 145. 
to give required notices to creditors, 181. 
crimes under the act by, 136. 

REFERENCES, 

of cases after adjudication, 122. 

REMAINDER, 

vested interest in contingent remainder passes to trustee, 254. 

REMOVAL FROM OFFICE, 
of referee, 141. 
of trustees, 153. 
of trustee, does not abate pending suits, 1.53. 

REMOVAL OF PROPERlTf, 

by bankrupt, when an act of bankruptcy, 16. 
RENT, 

accruing after adjudication, not a provable debt, 223. 

REVISION OF PROOFS, 

power of court over, 172, 177. 

RULES, 

to be prescribed by supreme court, 137. 



INDEX. 321 

[The figures refer to pages.] 



s 

SALES, 

of bankrupt's property by trustee, state courts have no power 

to interfere with or set aside, 124. 
by trustee, 159. 

subject to revision by court, 162. 
may be set aside by bankruptcy court, 162. 
formalities to be observed in, 160. 
■who may purchase at, 160. 
do not divest wife's dower right, 160. 
may be made free of incumbrances, 161. 
court may refuse to confirm, 162. 
creditors must be notified of, 181. 
to bring three-fourths of appraised value, 250. 

SCHEDULE, 

of assets, bankrupt to prepare and file, 53. 

must be verified, 53. 

requisites of, 54. 

omission of assets from, when a bar to discharge, 81. 

SECRETING PROPERTY, 

an act of bankruptcy, 16, 23. 

SECURED CREDITORS, 
defined, 2. 

may be petitioners in respect to excess of debt over security, 183. 
right to vote at creditors' meetings, 171. 
can prove only for excess of debt, 172. 
may surrender security and prove entire debt, 241. 
rights of, generally, 241. 

SECURITIES, 

exchange of, not a preference, 192. 

debtor may give, for advances In good faith, 194. 

SERVANTS, 

wages of, to have priority, 225. 

SET-OFF, 

mutual debts and credits to be set off, 243. 
claim not provable Is not allowable as, 243. 
claims purchased with view to, not allowed in, 246. 
BL. BANK.— 21 



322 INDEX. 

[The figures refer to pages.] 

SET-OFF— Continued. 

principles applicable to, under the act, 246. 

instances of, allowed, 24A. 
STATE, 

priority of debts due to, 228. 

STATE BANK, 

not subject to bankruptcy law, 25, 34. 

STATE COURTS, 

proceedings in, may be enjoined by bankruptcy court, 10. 

jurisdiction of, in matters of bankruptcy, 123. 

have no jurisdiction to set aside sale by trustee, 125. 

cannot enjoin debtor from filing voluntary petition, 26. 

jurisdiction of trustee's suit to recover assets, 124. 

no jurisdiction of trustee's action to set aside fraudulent con- 
veyance, 126. 

cannot enjoin trustee from collecting assets, 126. 

cannot stay distribution of bankrupt's estate, 231. 

dividends declared but not paid are not attachable on process 
from, 231. 

will take judicial notice of bankruptcy law, 274. 
STATEMENT, 

In support of proof of claim, requisites of, 172. 
verification of, 174. 

STATUTE OF LIMITATIONS, 

see "Limitation of Actions." 
STATUTES, 

liens created by, preserved in bankruptcy, 239. 
STAY OF PROCEEDINGS, 

stay of actions against bankrupt until discharge, 61. 
STENOGRAPHER. 

may be employed to take evidence at examinations, 144. 
STOCK-EXCHANGE, 

membership in, as assets in bankruptcy, 256. 
STOCKHOLDERS, 

bankruptcy court has power to call in subscriptions of, 15. 
SUBPOENA, 

service on bankrupt in involuntary cases, 106. 



INDEX. 323 

[The figures refer to pages.] 

SUBROGATION, 

of surety of bankrupt, paying debt, to rights of proving cred- 
itor, 172, 220. 

SUMMARY JURISDICTION, 
of banliruptcy court, 11. 

SUPREME COURT OP THE UNITED STATES, 

appellate jurisdiction in banliruptcy, 131. 

certification of controversies to, 132. 

to prescribe rules of procedure, 139. 
SURETY, 

banlvrupt's liability as, a provable debt, 215. 

of bankrupt, paying debt, may prove same, 173, 220. 

for bankrupt, not released by latter's discharge, 94. 

In what cases is to be regarded as a fiduciary debtor, 102. 

T 

TAXES, 

entitled to priority of payment, 225. 
not released by discharge, 95. 

TENDER, 

not an admissible plea to petition in bankruptcy, 113. 

TERRITORIAL COURTS, 

district, constituted courts of bankruptcy, 2. 

TIME, 

rule for computation of, 139. 
of taking effect of act, 267. 

TITLE, ' 

vested in trustee, 251. 

of trustee relates back to adjudication, 251. 

to exempt property does not pass to trustee, 48. 

TORTS, 

right of action for, does not pass to trustee, 259. 
claims for, vrhen provable debts, 223. 
provable if merged in judgment, 224. 
not released by discharge, 95. 

TRADE MARK, 

title to, vests in trustee in bankruptcy, 249. 



324 INDEX. 

[The figures refer to pages.] 

TRADING CORPORATIONS, 

are subject to bankruptcy law, 25. 
what are, 32. 

TRANSFER, 
defined, 4. 

of causes from one district to another, 140. 
of property, fraudulent, an act of bankruptcy, 16, 19. 
trustee may avoid any, which judgment creditors could, 236. 
of property, when amounts to preference, 187. 

TRESPASS, 

to bankrupt's property, right of action for, vests in trustee, 250. 

TRUSTEE IN BANKRUPTCY, 
office of, created, 141. 

to be chosen at first creditors' meeting, 149. 
proportion of creditors required to elect, 149. 
when to be appointed by court, 149, 151. 
number of trustees to be one or three, 149, 
who is eligible as, 150. 
qualifications of, 152. 
to give bonds, 165. 

failure to qualify, a declination of trust, 166. 
to give separate bond for each case, 167. 
confirmation of, by court, 151. 
removal from office, 153. 
vacancies in office of, how filled, 149. 
duties of, 154. 

title of bankrupt's property vests in, 249. 
may avoid fraudulent transfers, 187. 
title of, relates back to adjudication, 251. 
represents creditors, 251. 

takes no greater estate than bankrupt had, 252. 
what property vests in, 253. 

takes subject to what liens and incumbrances, 237. 
acquires no title to exempt property, 48. 
actions by and against, 155. 
may intervene in pending actions, 61. 
death or removal of, does not abate suits, 153. 
may recover property conveyed in fraud of creditors, 265. 
cannot be enjoined by state court from collecting assets, 126. 



INDEX. 325 

[The figures refer to pages.] 

TRUSTEE IN BANKKUPTOY— Continued. 

his right of action exclusive, 266. 

may prosecute appeals from judgments against bankrupt, 156. 

how should plead his oflaclal capacity, 756. 

liability of, for negligence of employes, 159. 

to deposit moneys of estate, 163. 

may submit controversies to arbitration, 134. 

may compound and settle claims, 135. 

may be. authorized to carry on debtor's business, 6. 

sales of bankrupt's property by, 159. 

formalities of sale, 160. 

•what interests not divested, 160. 

may sell free of incumbrances, 161. 

revision of sale by court, 162. 

limitation of actions by and against, 61, 6T. 

to execute all necessary deeds, 249. 

compensation of, 164. 

accounts and papers of, 165. 

expenses of administration, allowance of, 211. 

in bankruptcy of partnership, to be chosen by creditors of firm, 
40. 

embezzlement by, penalty for, 136. 
TRUST FUNDS, 

held by bankrupt, do not pass to trustee, 261. 

u 

UNINCORPORATED ASSOCIATIONS, 

subject to bankruptcy law, 25. 
UNITED STATES, 

may prove claim against bankrupt's estate, 219. 

debts due to, entitled to priority, 226. 
whether released by discharge, 05. 
UNLIQUIDATED CLAIMS, 

how liquidated and proved in bankruptcy, 212, 

V 

VACATION, 

jurisdiction of bankruptcy courts in, 5. 



326 INDEX. 

[The figures refer to pages.] 

VERIFICATION, 

of pleadings in bankruptcy, 106. 

of petition in Involuntary bankruptcy, 109. 

of schedule and inventory, 53. 

of statement in support of proof of claim, 172. 

VOLUNTARY BANKRUPTCY, 
vi^ho may file petition in, 25, 182. 
proceedings for, cannot be enjoined by state court, 25. 
of partnerships, 40. 
corporations not entitled to, 25. 



w 

WAGE-EARNERS, 
defined, 4, 35. 
not subject to bankruptcy law, 25, 35. 

WAGES, 

of labor, entitled to priority of payment, 225. 

WARRANT, 

for arrest of debtor, when issued, 58. 

to be directed to marshal, 58. 

for seizure of property, 248. 

creditor petitioning for, to give bond, 248. 

WIFE OF BANKRUPT, 
may be examined, 121. 

not required to disclose confidential communications, 121. 
dower of, not divested by trustee's sale, 160. 
may prove her claim as a creditor, 219. 

WITNESSES, 

persons having knowledge of bankrupt's affairs may be exam- 
ined, 120. 

WOMEN, 

Included in term "persons," as used in act, 3. 

WORBS AND PHRASES, 
see "Definitions." 

WRIT OF ERROR, 
see "Appeal." 

WBHT FUBLltjUINU CO., PBIHTERB AMU BTEHEUTYPKRS, ST. FAUL, MINN. 



OTHER WORKS BY H. CAMPBELL BLACK. 



Black's Dillon on Removal 
of Cau$e$. 

A new and systematic treatise by Mr. Black, based 
upon Dillon's Removal of Causes. Judge Dillon's work, 
excellent as it originally was, had become quite obsolete 
in consequence of the radical changes in the law of the 
subject caused by the legislation of congress, and the 
great accumulation of new cases under the act of 1887. 
It was therefore placed in the hands of Mr. Black, the 
editor of the later editions, to be rewritten. 

The best description of a book is the table of con- 
tents: 



The Removal Acts. 

The Bight of Bemoval. 

What Suits are Bemovable. 

Enforcement of Civil Rights 
Acts. 

Prosecutions of Federal OflB- 
cers. 

The Amount in Controversy. 
Parties Entitled to Removal. 
Citizenship as a Ground for 
Removal. 

Citizenship of Corporations. 

In its own field this work will undoubtedly be the 
standard reference book for the profession. Every law- 
yer, whether a Federal practitioner or not, may have 
a case which he wishes to remove, or which his oppo- 
nent wishes to remove, to the Federal Courts. This 
thorough and trustworthy text-book will be of the great- 
est assistance in showing the rules applicable to re- 
movals and the method of procedure. 



Federal Questions. 

Prejudice and Local Influence, 

Separable Controversies. 

Time for Application for Be- 
moval. 

Petition and Bond for Re- 
moval. 

Proceedings to Obtain Re- 
moval. 

Jurisdiction of Federal Court 
on Removal. 

Proceedings After Removal. 

Remand of Cause. 



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Every practitioner will find it of distinct advantage to 
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Interpretation with Reference 
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Construction of Provisos, Ex- 
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MARTIN P. BURKS, Reporter of the Supreme Court of Appeals 
of Virginia, writes: 

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book to the profession." 



Strict and Liberal Construc- 
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Mandatory and Directory Pro- 
visions. 

Amendatory and Amended 
Acts. 

Construction of Codes and Re- 
vised Statutes. 

Declaratory Statutes. 

The Rule of Stare Decisis as 
Applied to Statutory Con- 
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Precedents. 



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definitions and General Prin- 
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The United States and the 
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The Three Departments of 
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Municipal Corporations. 

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Political and Public Bights. 

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Laws Impairing the Obliga- 
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Betroactive Laws. 



Bon. JOHN M. HARLAN, Associate Justice of the U. S. Su- 
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"His statement of the settled principles of Constitutional 

Law shows that the author has himself studied the cases cited by 

him." 

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Judicial Circuit, Michigan, writes: 

"I have examined Black on Constitutional Law, and consid- 
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Tax Titles. 

Their Creation, Incidents, Evidence, and 
Legal Criteria. 

A careful treatise on a complicated branch of Real 
Property law, adapted for use in all the states. 



TABLE OF CONTENTS. 

Who May Purchase a Tax Title. 

Purchase by the State or County. 

Procesdings Subsequent to the Sale. 

Certificate of Purchase. 

Rights of Owner After Sale. 

Notice to Redeem from Tax Sale. 

Redemption from Tax Sales. 

Purchaser's Application for a Deed. 

Requisites of Tax Deeds. 

Purchaser's Suit for Possession and 
to Confirm his Title. 

What Estate the Purchaser Takes. 

Action to Set Aside the Sale and Deed. 

Pleadings and Evidence in Actions 
Concerning Tax Titles. 

Reimbursement of Purchaser of In- 
valid Title. 

Statutes Curing or Confirming Irreg- 
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Limitation of Actions. 

Tax Deeds as Giving Color of Title. 



Taxation in General, and its Consti- 
tutional Limitations. 

Exemption of Property from Taxa- 
tion. 

Apportionment of Taxes. 

Assessment of Taxes. 

Equalization and Review of Assess- 
ments. 

The Power to Sell Land for Non- 
payment of Taxes. 

Judgment Against the Land for Taxes. 

The Tax Lien, its Creation and Dis- 
charge. 
Forfeiture of the Land. 
Proceedings Preliminary to the Sale. 
Injunction Against Tax Sale of Land. 
Time and Place of Sale. 

For What Charges the Land May 

be Sold. 
Conduct of the Sale. 

How Much and What Land May be 

Sold. 
Validity of the Sale as Depending on 
J Ownership. 

"One who claims right through a tax title is like a man 
standing on a quicksand, — his position is apt to be very precari- 
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deal like that of Jacob in the purchase of a birthright for a mess 
of pottage, — a transaction apparently perfectly legal, but which 
does not commend itself to the moralist. But others besides 
mere speculators must often claim through, or buy, a tax title, 
and the subject is one of some importance and of difficulty. 
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law on the questions treated, and appears to be accurate and re- 
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Tntoxicannd Dquor$. 

Covering both the civil and criminal laws relating to 
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The only general work on the subject. 



TABLE OF CONTENTS. 



Definitions and Construction 
of Terms. 

General Theory of the Police 
Power. 

Constitutionality of Liquor 
Laws. « 

Liquor Legislation and the 
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Taxation of the Liquor TraflBc. 

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cians and Druggists. 

Regulation of Liquor TraflSc 



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Water Rights. 

Being a revised and enlarged edition of •< Pomeroy on Ri. 

parian Rights," with several additional 

chapters by Mr. Black. 



The complete revision of Judge Pomeroy's work, 
and the addition not only of new citations, but of new 
matter as well, make the present edition practically a 
new work. Mr. Black has added five supplementary 
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rights on navigable streams," and "Littoral rights." 
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The work as it now stands presents the law of Wa- 
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Pacific, Northwestern, and Southwestern states, includ- 
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decisions relating to Irrigation. 



TABLE OF CONTENTS. 



Cbap. 

I. Introduction. 
II. The Common-Law Doctrine. 

III. Appropriation of Waters Flow- 

ing Through the Public Do- 
main. 

IV. How an Aporopriation is Ef- 

fected. ' 
V. Nature and Extent of the Right 
Acquired by Appropriation. 
VI. Legislation on Water Rights. 
VII. Riparian Rights on Private 
Streams. 



Chap. 

VIII. Use of Waters for Irrigation. 
IX. Suggestions for Legislation on 

Riparian Rights. 
X. Irrigation and Ditch Compa- 
nies. 
XI. Irrigation Districts. 
XII. State Supervision of Distribu- 
tion and Use of Water. 

XIII. Riparian Rights on Navigable 

Streams. 

XIV. Littoral Rights. 



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Black's Law Dictionary. 

Excludes encyclopedic matter, but includes more 
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published. 



It is chiefly required in a dictionary that it should be compre- 
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These considerations have been kept constantly in view in the 
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gether with some not elsewhere defined. 



An Interesting Comparison. 

The comprehensiveness of Black's Dictionary of Law is shown 
by the following comparative statement of the number of titles 
under the letter A in several law dictionaries in common use: 



Abbott's, 

Anderson's, . 

Jacob's, 

Eapalje & Lawrence's, 

Bouvier's, 

BLACK'S, . 



286 
379 
500 
746 
847 
1801 



The other letters are in about the same proportion. 



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